The owner’s of Castle Howard have won their fight to avoid paying a £9.4 million tax bill on the sale of a painting by Sir Joshua Reynolds.
A tax tribunal has ruled that Omai, Sir Joshua’s romantic portrait of one of the ﬁrst Paciﬁc Islanders to visit Europe, was just a piece of “plant or machinery” used to boost visitor numbers, and therefore not subject to taxation.
The painting, which was ﬁrst exhibited at the Royal Academy in 1776 – the year of American independence – has graced the walls of the Ryedal mansion for centuries, before its sale at Sotheby’s more than 10 years ago.
It was bought by the Earl of Carlisle in 1796 and was sold at Sotheby’s in 2001, in part to fund the divorce of Simon Howard, whose family has owned the house since it was built, from his wife Annette.
Omai was part of the estate of politician, soldier and former chairman of the BBC’s Board of Governors, Sir George Howard, who died in 1984, and, ever since the sale, his executors have been arguing with the tax authorities over whether the £9.4 million should be subject to capital gains tax.
The executors, who include Simon Howard, argued that, as the painting was one of the main draws for visitors to Castle Howard, it should be viewed as “plant” used in the running the house as a business and thus exempted from the tax levy.
The executors won the debate when Mr Justice Morgan ruled the painting indeed fell into the category of “plant and machinery” as deﬁned by the Taxation of Chargeable Gains Act 1992.
The judge accepted it should thus be viewed as a piece of “apparatus” and a “wasting asset” that, at least in theory, became worthless 50 years after it was placed on public display in the 1950s – even though its value has infact continued to multiply since then.