A dispute over how a famous painting in a stately home should be taxed recently reached the Court of Appeal.
The courtruled in favour of the taxpayer (The Executors of Lord Howard of Henderskelfe), who had won a case in the upper tribunal.
The dispute is about whether a painting by Sir Joshua Reynolds is a “wasting asset” and exempt from capital gains tax.
The custodians of a stately home which featured in the BBC television series Brideshead Revisited, have been spared a tax bill on the £9.4m sale of a famous eighteenth century painting after winning the latest case.
HMRC won a case in the the first-tier tribunal, but this decision was later overturned by the upper tribunal.
In 2013, it ruled (UKUT 129 (TCC) that the famous painting of Omai, a young South Sea Islander, by Sir Joshua Reynolds, which was exhibited in Castle Howard, Yorkshire, was a piece of “plant or machinery” used to boost visit numbers to the house. Plant and machinery is categorised as a wasting asset.
As the painting had been loaned to an associated trading company whose business was inviting the general public to view the house, the Court of Appeal ruled that the asset was kept for permanent employment in a business.
“With a lot of tax at stake it is likely that HMRC will appeal the decision to the Supreme Court, but we must wait to see. HMRC had been provided with initial encouragement after a win in the first-tier tribunal.”