Whiskey scams in Somerset
Rare whisky was the best performing collectable in a decade. So said a report from Knight Frank Wealth. They suggested that rare cask whisky was experiencing an average annual 54% rise in value. Now, Knight Frank Wealth are a reputable company and they know what they are talking about. The junk mail pouring through the email spam filter at Leveller Towers over the past month says the same. Indeed there is a lot of this stuff around Somerset right now. The emails contain many promising looking offers to help us invest in whisky. But these, it turns out, are not from reputable well established businesses. God bless Companies House!
If you see the blurb about investing and fall for it, the first thing to check is the company making the offer. The spam mail we received came from two companies. Both claimed to be “able to buy large amounts of new make spirit from distillers at wholesale prices”. Indeed they might. But both companies were incorporated at the end of 2019 with £100 share capital. Neither has yet managed to file a set of accounts. It is not immediately clear how a start-up business with £100 capital is “able to buy large amounts of new make spirit from distillers at wholesale prices”. In fact they might struggle to buy a single bottle.
The problem with these, as with any other get rich quick scheme is that it is simply too good to be true. Which usually translates as not actually true at all. The investment returns that can be made from whisky are undeniable. The deals you may be offered over the internet may be less attractive. And for starters, as the Daily Mail’s This Is Money site pointed out at the start of last year: “over the past 12 months the Rare Whisky Icon 100 Index – which measures a hundred of the most collectable bottles – has seen its value tumble by 10 per cent.” In other words, as with any other investment, prices can go down as well as up.
Safeguarding your investment
If you are tempted to invest in whisky there are some things you need to think about. The whisky industry is unregulated. Think about that. If you are scammed you will not get your money back. Only use an established reputable firm with a demonstrable track record. And importantly, ensure it has enough cash of its own to invest.
What is the deal on insurance? The email enticement you receive may not be from a scammer after your cash. But you need to know you’ll be insured. What if your cask (you are being sold a very specific cask personal to you) is damaged or lost in storage (fires have been known)? Would your loss would be insured. And if so, is that for cost? Say after eight years in storage your cask is lost in a warehouse fire. What if the insurance only pays out the cost (current value is hard to prove on a whisky that is too young to bottle and sell)? That’s not a tempting proposition now is it?
You will be told lots of things about how your cask can be sold on to others. You may be told much less about the costs that you’ll incur beyond the purchase of your cask. For instance, the cost of bottling. The cost of duty and VAT. VAT is 20% on the cask cost price. Duty comes out at just over £28 per litre of alcohol.
If you own the cask, you will have to pay the VAT and duty when the whisky is bottled. Be wary that this could put a fair old dent in the value of your investment. And that’s before you even think about the cost of bottling.
Can you simply offload the cask to a willing buyer of the cask? Possibly. But that leads to the next question. You were probably told that the whisky was cask number xxxx from distillery yyyy, but can you prove it? What is the provenance of the cask you have bought? And bear in mind that a potential purchaser will have done this before. If you cannot give absolute proof of provenance, no-one will touch it with a barge pole.
All the above does not mean that people can’t make money from investing in whisky. But, like any other investment, it is risky. It is riskier if you don’t know what you are doing. And riskiest of all is dealing with a company that neither you, nor indeed anyone else, has ever heard of. If you want to do this, use an established company with a reputation.
Personally I will content myself to pop into my local off licence… Somerset has so many truly excellent, independent ones to choose from. Cheers!