Since January 2024 37 governments have started receiving data about your online sales activity, including the sale of any whisky bottles over $2,190 (£1,700).
The amount of tax you should pay has not changed. However, since the start of 2024 governments signed up to the Organisation for Economic Co-operation and Development (OECD) have started to receive and share more information on what is sold. This includes any whisky sold through UK based online platforms. So now is the time to check you aren’t accidentally trading.
Much of the media attention has been around sales on sites like eBay, Etsy and Airbnb, but online whisky sales will also be included in the changes. In 2023 Whisky Auctioneer, who are one of the larger specialist online whisky auctions based in the UK, shared that they sold 95,000 bottles. They are just one website out of a growing number of specialist online sites that sell bottles to and from customers all over the world.
Market analysts Nobel & Co reported that the volume of bottle sales on the secondary market was up 9% compared to 2022, but that the average price per bottle “continued to trend down.” This combination leads to the obvious question; what impact will the new system have on an already flat whisky auction market?
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Disclaimer
Before we go further, please note that I am not a tax specialist. The below is my opinion and interpretation; it should not be used as a substitute for professional tax advice.
Tax Laws When Selling Whisky Online?
How much tax you pay on items you sell online hasn’t changed, and that includes whisky. What has changed is that online platforms based from any country in the OECD are legally required to collect information on value and volume of sales for sellers. They then have to report figures over a certain threshold to their local tax body, in the UK that’s HMRC. That includes the online whisky auction sites and some of them have already started.
Don’t assume you’re exempt if you’re not from the UK. The system aims to reduce tax evasion globally by sharing data between each of the 37 countries signed up to the international Organisation for Economic Co-operation and Development. We don’t know exactly which countries they are, but it’s likely most of the 27 EU member states and therefore at least 10 others.
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Not all sales will be reported. Only sellers who sell more than 30 items or make more than €2,000 (currently around £1,700 or $2,100) will have their information reported.
When you need to pay tax hasn’t changed, so if you’re declaring your income and paying the right tax then the changes won’t impact you. However it’s likely that a lot of people selling whisky through online auctions aren’t paying the right tax. And that’s probably because they don’t realize they have to.
When You Need To Pay Tax For Selling Whisky Online: Private Individuals
If you are a private individual selling whisky bottles online through a UK based auction, but are not in the UK for tax purposes, then still be aware that the UK government will share the reports with the other governments signed up to the agreement. As we’re not sure who that is, you probably still want to declare sales over $2,100/£1,700 or 30 items or more.
Generally, if you’re casually selling your own stuff online then you don’t need to pay tax on any individual item under £6,000. The information provided by the UK Government online states, “If you are just selling some unwanted items that have been laying around your home, such as the contents of a loft or garage, it is unlikely that you will have to pay tax.” This covers things like selling your old clothes etc., and my opinion is that it probably applies to that old whisky bottle that’s been stuffed in the back of your drinks cabinet for 30 years.
However I’m not sure how that would be impacted if you’ve specially shipped a bottle overseas to sell it for more money elsewhere. So definitely take tax advice if you are thinking of selling bottles abroad.
If the item you are selling is between £1,700 and £6,000, or you sell more than 30 items a year, then the new system means HMRC will know, so you should declare your income, even if the tax due is zero.
If you’re selling as a private individual and the item sells for over £6,000 gross then in the UK you’ll be liable for capital gains tax. Under the new reporting system HMRC will know about the sale so you need to declare it.
When You Need To Pay Tax For Selling Whisky Online: Traders
The aim of the new reporting system is not to tax individuals selling their old stuff, but to discover the thousands of people who are undeclared traders, whether accidental or not.
In the UK traders need to pay tax on their profits for any gross income over £1,000. Outside of the UK you should check your local tax threshold. We think the issue with people selling whisky online is that many individuals don’t realize that what they’re doing is trading.
The definition of trading is the area where most whisky collectors and investors will be caught out as it’s all about intention. “If you buy goods for resale, or make goods with the intention of selling them for a profit, then you are likely to be trading and will have to pay tax on your profits,” is the guidance direct from gov.uk website.
Essentially, if you bought something with the intention of selling it for a profit then that makes you a trader. Technically I think that probably includes every person who ever bought a bottle at retail and put it straight into auction knowing it would sell for more—a technique known as flipping.
For context of who this may catch out; The Macallan Archival Series Folio 7 retailed at around $450 (£350) in April/May 2023 (release dates were earlier for VIPs), more than 200 bottles sold at auction across April and May 2023. In that same period auction hammer prices ranged from $1,1200 to $3,300 (£920 to £2,550). Potentially each of those sellers is a trader if they purchased the bottle knowing they could put it straight into auction for a profit. Even those that sold for less than $1,300 (£1,000) likely cross the gross tax threshold after buyer’s commission is considered.
It’s likely that a fair portion of the sellers above wouldn’t have known they were trading, and so would not have reported it correctly. This singular example covering one release over two months demonstrates the potential number of sellers the new reporting may catch out.
The gray area for collectors and investors, especially those circulating their collection regularly, is how do you prove that you didn’t buy something solely with the intention of turning a profit.
Licencing
Another interesting note on accidental traders is that to sell alcohol as a wholesaler in the UK you need to be registered—and this likely includes traders at auction. Private individuals can sell through auction sites or other companies that have the right licenses themselves, but auctions are classed as wholesale platforms. This means the new reporting may cause further disruption to the secondary whisky market.
A Significant Potential Impact For Secondary Whisky Sales
Flipping bottles at auction for a quick profit has become a huge part of the secondary whisky market and the vast majority of the specialist whisky bottle auctions are based in the UK. There is no data on the number of bottles specifically flipped, but we can think of four examples from Macallan alone that were released in 2023 that would likely qualify. As the individuals who joined the secondary whisky market to buy and sell those types of bottles realize they have to pay tax on the profits it will be interesting to see what impact that will have on the volume and value of sales over the coming year.
This change is sure to have the biggest effect on releases that have traditionally been short term flips, and it’s not just auction sales that are going to be impacted. If buyers don’t think the potential returns from certain bottles are attractive enough once taxed, then potentially distilleries are going to start seeing an effect on sales.
We have already seen big changes in the secondary market throughout the first half of 2024. Is it possible that these secondary tax considerations are adding additional pressure to a market that is already stressed from other economic factors?
As with many new systems, it’s going to take a while for the full impact to be realized and teased out from the other impacts to the market in 2024. Plus with tens of thousands of bottles sold in 2023 we imagine the new department checking all the data will have a lot on their hands. Even so, wherever you are based, if you are not 100% certain where you stand, I suggest getting professional tax advice if you are selling whisky online.
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