Art is wasting asset

The late Lord Howard of Henderskelfe owned a painting by Sir Joshua Reynolds and had allowed Castle Howard Estate Ltd – owner of Castle Howard since 1950  – to display the work.

The arrangement saw the company bearing the related costs of insurance maintenance restoration and security. No formal lease existed.

Lord Howard died in 1984. His executors sold the painting in 2001 and claimed the gain from the sale was exempt under TCGA 1992 s 45 on the basis it was a wasting asset.

HMRC refused the claim saying the painting was not plant. The First-tier Tribunal dismissed the executors’ appeal which they took to the Upper Tribunal.

The Upper Tribunal said the painting satisfied the established tests as to the meaning of plant with regard to function and to permanence.

It had functioned as an exhibit in the trade carried...