Until recently, cask whisky was difficult to purchase. So, unlike equities and bonds, it’s not a ‘crowded trade’. Buying tangible assets gives you more financial security as products can’t go bust like organisations can. It makes buying a Cask Whisky a much more attractive option.
Casks are the industry name for a wooden barrel. Casks are sourced from the US and made from American oak, where they have previously been used to age Bourbon whiskey. Scotch Whisky doesn’t like to mature in newly made casks as it takes on too much flavour from the wood. Bourbon, however, prefers newly made casks.
Casks can be described as ‘first fill’ or ‘refill’. An American whiskey cask that is being used to mature Scotch for the first time is referred to as ‘first fill’. It becomes a ‘refill’ cask when used for a second or subsequent time.
A cask purchase gives you a package that includes the high-quality oak cask and the New Make Spirit inside. Just as importantly, it secures bonded storage for 10 years to allow the whisky to mature and increase in value. Insurance is also included on the casks to ensure your peace of mind when purchasing.
Purchasing a complete package with Whisky Investment Partners means there are no additional fee’s during the first 10 years.
New Make Spirit must be fermented and distilled in Scotland, using malted barley, Scottish water and yeast. The New Make Spirit is then matured in oak casks for a minimum of 3 years. The casks must be stored in Scotland throughout the maturation process. The only additive permitted is caramel.
After Cask Maturation, the New Make Spirit has become Scotch Whisky. The Scotch Whisky Regulations of 2009 mean that the quality restrictions surrounding Scotch Whisky production are strict. This ensures you’re purchasing the highest quality, luxury product. It also carefully preserves the unique flavour produced in Scotch, which is unmatched worldwide.
In the unlikely event that we, the distillery or bonded warehouse ever went bust. Your asset would simply be moved to another bonded warehouse. It’s your cask, you own it. It would not be party to the liquidator’s claims.
With the whisky market at record levels, there are plenty of opportunities to make a profit on your purchase with Whisky Investment Partners. 41 bottles of whisky are exported from Scotland to the rest of the world every second.
The whisky blending industry is hugely lucrative, giving you multiple opportunities to sell your whisky after it’s matured. There are numerous platforms, brokerages and auction houses which specialise in the sale of whisky casks. Whisky Investment Partners will be with you every step of the way.
The good news is that whisky casks are classed as a wasting asset. As such, they’re not subject to capital gains tax. Even though it may be good news that your whisky cask won’t be subject to capital gains when you come to sell it, you may be wondering why your cask is classed as a wasting asset?
Casks are made from wood, which is porous. Some whisky is absorbed by the wood and some is lost to evaporation. An average of 2% of the whisky in a cask is lost each year, which is known as The Angels’ Share. Because of alcohol lost to the Angels’ Share, HMRC classifies whisky spirit in casks as wasting goods, therefore the CGT exemption applies.
The simple answer is yes. However, we have to appreciate that bonded warehouses are working facilities. They have strict health and safety policies in place to prevent accidents or injury. As such, they can’t accommodate drop in visitors. Whisky Investment Partners will arrange group viewing days that can also be tied in with a tour of the distillery.
Yes, your casks are fully insured for 10 years from the start of your ownership. All casks must be fully insured to meet the strict storage requirements of the bonded warehouse. We meet this obligation by insuring all casks under a group policy with Aviva. Our premiums are adjusted annually to allow for the rise in value of each cask, ensuring each and every cask has the appropriate level of cover. The insurance covers, damage, full loss and theft.
A bonded warehouse is a tax-free storage location. Duty and tax payable on goods held there are deferred until the goods are purchased and shipped out. This is usually by a professional blender who acquires your whisky for bottling when it’s mature. Because of the high potential tax take from alcohol, bonded warehouses are licenced and closely monitored by HMRC. They’re among the most tightly controlled locations in the country. Your cask’s in safe hands.
Whisky is unlike many stored goods – it develops and increases in value as it ages in the cask. Purchasing casks, instead of bottles, is a specialist approach. But, it’s much more profitable in the long term. Unlike wine, whisky doesn’t mature in the bottle. Once Scotch Whisky is bottled, there’ll be no change in its flavour. The age statement on the bottle refers to the amount of time it’s spent maturing in the cask. Its ‘age’ doesn’t change even if the bottle is kept for decades. A 10-year-old whisky will always be a 10-year-old whisky once bottled.
Generally, the longer that you leave the whisky in the cask, the higher quality it’ll be. So, older whiskies command higher prices. Purchasing casks means you’re receiving a product that will improve and develop over time. Also, tax on whisky in the bottle is much higher per LPA than on spirit in the cask. There’s no duty charged on the whisky as it’s maturing in a bonded warehouse either, which makes it very tax efficient.
This refers to the amount of whisky lost during the ageing process. In order for whisky to properly age, it has to breathe. Anytime you store a liquid in a non-airtight container, you will lose some to evaporation.
However, The Angels’ Share actually plays something of a necessary role in whisky maturation. This process of evaporation is how distilleries eliminate some of the unwanted ingredients of their whiskies. While some “fresh” brews may be clocking in at a very high alcohol content, this is guaranteed to taste awful. Distilleries rely on this evaporation process to eliminate some of the alcohol and allow the other ingredients to take a more prominent role within the whisky.
We see very limited downsides to investing in casks of whisky. The only real risk is that whisky falls out of fashion and there is suddenly no real demand for whisky.
Although past performance is no guarantee of future performance, we simply can’t see this happening. With more and more developing nations rising through the ranks, we feel that there’ll be an even greater demand than we’re seeing today. Whisky exports have seen year-on-year growth every year for over 30 years now.