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Castle Howard painting at centre of CGT dispute

A dispute over whether a £9.4m painting from Castle Howard should be exempted from capital gains tax has today (30 November 2012) reached London’s High Court.

30 November 2012

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The Sir Joshua Reynolds painting, Omai, was on display at the stately home in Yorkshire for more than 200 years until it was sold at Sotheby’s in 2001, in part to fund the divorce of Simon Howard from his wife, Annette.

The 18th century masterpiece, a romantic portrait of one of the first Pacific Islanders to visit Europe, fetched a then record £9.4m and is now owned by John Magnier, the Irish stud owner.

However, Howard and his fellow executors of the estate are battling to avoid paying capital gains tax on the sale. They argue that the painting was merely a ‘plant’ used to boost Castle Howard’s business by attracting visitors.

Under capital gains tax rules, such plants are ‘wasting assets’ and exempt from capital gains.

William Massey QC, representing the executors, said that Sir Joshua’s work was a major attraction that drew in the public and argued that, without it and other works of art, the stately home would have been unviable.

A tax tribunal dismissed those arguments last year after pointing out that although Omai was “no doubt greatly admired by visitors” its sale did not lead to any falling off in visitor numbers, which in fact increased by ten per cent in subsequent years.

The appeal is being heard by Mr Justice Morgan and is expected to last two days. If successful, the decision will be seen as a huge boost to other landed families who own valuable collections of art or antiques.

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Tax & Wealth structuring