Oh my — the Commissioners of HM Revenue & Customs v Executors of Lord Howard of Henderskelfe (deceased)

The Court of Appeal has dismissed HMRC’s appeal and confirmed that the owners of the famous painting of Omai by Sir Joshua Reynolds were exempt from capital gains tax (CGT) on its sale in 2001 for £9.4m.

The painting was owned by the late Lord Howard and was exhibited during his lifetime and after his death at Castle Howard. Castle Howard Estate, which owned the property, ran a business of opening a large part of Castle Howard to the public and, inter alia, exhibiting works of art. Lord Howard, and following his death his executors, permitted the company to use the painting in this trade. There was no formal licence or loan and the arrangement was technically terminable at will.

The executors had argued that the painting fell within the common law definition of ‘plant’ in Yarmouth v France (1887) and thereby constituted a ‘wasting asset’ under section 44 of the Taxation of Chargeable Gains Act 1992 (TCGA). As a result, the executors were exempt from CGT on the sale, by virtue of section 45 (1) TCGA. This was accepted by the Upper Tribunal and has now been confirmed by the Court of Appeal…

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