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Castle Howard tax case


This is a very interesting judgement.  The ongoing saga of HMRC v The Executors of Lord Howard of Henderskelfe recently reached the Court of Appeal.  The taxpayer won again in this round of judgements having previously being successful in the Upper Tribunal and High Court.  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.  I suspect that HMRC will move quickly to close some possible loopholes here in case anyone else decides to follow the same route.

Crux of the Case

The late Lord Howard's estate sold an 'Old Master’ painting by Sir Joshua Reynolds for a significant gain.  They claimed an exemption from capital gains tax as they believed it was plant and machinery and therefore 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 held that the asset was kept for permanent employment in a business.  Therefore, as it was a chattel it was plant and machinery, which qualified as a wasting asset and for the beneficial CGT treatment.

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