Tax battle over £9.4m Castle Howard portrait

A LEGAL tax battle is underway over a £9.4m painting that hung on the walls of one of the region’s great stately homes for centuries.

Omai, a romantic portrait by Sir Joshua Reynolds of one of the first Pacific islanders to visit these shores, used to grace the walls of Castle Howard, near Malton in North Yorkshire.

But in 2001 it was sold at Sotheby’s, partly to fund the divorce of Simon Howard - whose family has owned the house since it was built in the 18th-century - from his wife, Annette.

It was part of the estate of former chairman of the BBC Board of Governors Sir George Howard, who died in 1984, and ever since the sale, his executors have been rowing with the tax authorities over whether the £9.4m should be subject to capital gains tax.

The executors argue that, as the painting was an essential draw for visitors to Castle Howard, it should be viewed as "plant" used in the running of the house as a business and thus exempted from the tax.

The case has now made its way to the Royal Courts of Justice in London, where lawyers for Her Majesty's Revenue and Customs are fighting the executors every inch of the way.

Sir George Howard lent Omai to the estate company that has owned Castle Howard since 1952 and the executors' QC, William Massey, said Sir Joshua's work was a major attraction that drew in the public.

He argued that, without it and other works of art from Sir George's collection, the stately home would have been unviable.

However a tax tribunal dismissed those arguments last year after pointing out that the sale of the painting did not lead to any falling off in visitor numbers - which in fact increased by 10 per cent in subsequent years.

The tribunal also said the painting had only been loaned to the company by Sir George on an "informal basis" - on condition that insurance, restoration, security and other costs were met - and he could have asked for it back at any time.

Mr Massey however insists that Omai was part of the “functional apparatus” used in the home’s visitor trade and is asking Mr Justice Morgan to overturn the earlier tribunal’s decision.

A judgment is expected in the near future – and other landed families who own valuable collections of art or antiques are thought to be watching developments carefully.

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