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I purchased a small L S Lowry painting in 2000 for £33,000.00.

I have all necessary receipts...
I purchased a small L S Lowry painting in 2000 for £33,000.00. I have all necessary receipts. Upon trying to sell the painting rexcently through a London Auction they tell me the painting may not be authentic and would not sell it. The value has now dropped to a small amount for an L S Lowry 'lookalike' or I may preferably want to have it destroyed by the auction house so it does not find it's way onto another unsuspecting buyer in the future.
With all necessary back up paperwork form the auction house will I be able to claim a capital loss on this transaction of the difference between what I paid and what I sell it for now ? Thank you.
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Answered in 6 minutes by:
8/9/2012
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
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Hi.

Can you tell me how much the fake Lowry is worth now please.
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Customer reply replied 5 years ago
Probably a £150 or so as nice small lookalike oil painting in a nice frame but I would not be keen to sell it back onto the market in case someone in the future tries to pass it off as a real Lowry. I may be able to get the auction house to pay a nominal sum and then destroy it.
Thanks.

The painting is treated as a chattel for Capital Gains Tax purposes. So, if you sell it for less than £6,000 (say £150), you will be treated as having received £6,000 for it in which case your allowable capital loss will be £27,000. If you sell it for £8,000, your allowable capital loss will be £25,000. Take a look here for more information on chattels and CGT.

Let me know if you have any further queries.
Tony Tax
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Customer reply replied 5 years ago


I would like your advice as to how I prove the capital loss to HM Revenue and Customs. I have original purchase receipts and can obtain letter from London's Bonhams auction house confirming the small oil is a fake and giving present value , estimated by Bonhams, well below the £6000 limit. Would this surfice?


I am thinking of asking Bonhams to arrange to have the small oil destroyed and send to me a letter confirming this has been done as I do not want it to get onto the market at some future time and perhaps be bougth by another unsuspecting collector, will this surfice HM Revenue to allow my capital loss?

That would do. If you don't already complete annual tax returns a letter to the tax office setting out the facts and figures will suffice. Don't send any receipts unless you are asked to. You don't need to do that until after the end of the tax year in which you sell the painting.

Strictly, the loss won't be an actual loss until you have sold the piece. Whether the Revenue will allow the loss on the basis of destroying it I will have to look into. Leave it with me and I will get back to you.
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Customer reply replied 5 years ago


Thank you. Look forward to hearing from you.

Thanks.
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Hi again.

I'm afraid I've been unable to find anything that would suggest that you can claim a capital loss by having a fake work of art destroyed. You would need to sell it in order to claim the loss.

 

I will keep on looking for any piece of information which may help.

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Customer reply replied 5 years ago
,Thank you very much. I feel very uncomfotable selling this fake Lowry in case someone in the future tries to pass it off again a Genunine Lowry but if I must sell it for a small ammount and get a receipt then that is what i must do to create the capital loss.If you can advise any other 'good citizen' route please do come back to me.Very, very many thnaks.
Thanks and good luck.
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