A recent Upper Tier Tribunal case – Executors of Lord Howard of Henderskelfe (dec’d) [2011] TC 01340 – considered the Capital Gains Tax implications of the sale of a painting by Sir Joshua Reynolds.

The painting, owned by Lord Howard, was informally lent it to a company that put it on display at Castle Howard, Lord Howard’s stately home, as part of the company’s ‘house-opening trade’.

Lord Howard died in 1984 and the painting was sold by the executors of his estate in 2001.  Throughout this period, the painting continued to be displayed by the company. The executors claimed that the painting was tangible moveable property which was ‘plant’ and therefore a ‘wasting asset’.  The result being that the gain on the sale of the painting would be exempt from capital gains tax.

The first-tier tribunal originally found in favour of HMRC, who argued that the painting was not plant because the executors did not have a business.  However, Mr Justice Morgan at the Upper Tier Tribunal found in favour of the executors, agreeing that the painting represented plant, stating, “the painting satisfied the tests as to function and as to permanence in the established test as to the meaning of plant”.

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