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VAT – Racehorse Owners VAT scheme (notice 700/67 January 2002)

Following an agreement with the British Horseracing Board and HM Customs & Excise (now HM Revenue & Customs) the Registration Scheme for Racehorse Owners (‘the scheme’) was introduced on 16 March 1993 following a long period of consultation and negotiations. The scheme recognised that owners who were seeking sponsorship and appearance money for their horses would be treated as a business and therefore could apply to be VAT registered. Once registered under the scheme, owners must account for VAT on their business income including sales of horses and prize money. The benefit of the scheme to owners is they are then able to recover the Input VAT on purchases and associated costs assuming they would be recoverable under the normal rules.

Owners who can register under the scheme include:

Breeders

Dealers

Trainers

Racing clubs.

The scheme was later reviewed in 1997 and, from 1 January 1998, all owners wishing to join the scheme can only apply for VAT registration if:

a) The racehorses are covered by a sponsorship agreement or are covered by a trainer’s sponsorship agreement (either must be registered at Weatherbys);

Or

b) The owners can demonstrate that they have received, and will continue to receive, business income i.e. appearance money or sponsored number cloths.

For the sponsorship agreement to be valid it must meet the minimal level of fees to be considered as a business activity. As from 31 August 2001, the ‘Racehorse Owners’ Sponsorship Code of Conduct: 1998 Edition’ was replaced with the 2001 Edition. The revised edition made the following minimal values mandatory:

1-9 horses

£300 per horse per annum (not pro rata if for less than 12
months) OR

£750 per horse per annum (not pro rata if for less than 12
months) if any horse runs in a Class A race in Great Britain.
A Class A horse is one that has run in any Group or Listed
Race in Great Britain

10 or more horses

£100 per horse per annum (not pro rata if for less than 12
months)

How to register under the scheme?

1. Obtain the appropriate form from HM Revenue & Customs (PDF versions available on their website)
a. VAT 1 for individuals
b. VAT 1 & VAT 2 for partnerships

2. Obtain the appropriate form from Weatherbys
a. D1 for individuals
b. D2 for partnerships

3. Complete the D form to confirm you have a sponsorship agreement or have received income from racehorses you currently own and send the form to ‘VAT Declarations’ at Weatherbys, Sanders Road, Wellingborough, Northants, NN8 4BX.

4. After Weatherbys have checked and certified the details, and returned the form to you; you should then send the certified D form together with your completed VAT registration form(s) to the VAT Registration Centre which covers your postcode district.

If your registration is approved, HM Revenue & Customs will issue you with your VAT registration number. Your effective date of registration will normally be the date the completed D form was certified by Weatherbys.

Remember, you cannot use the scheme if you own less than a 50% share in a horse. However if you meet the conditions of the scheme, you and the other partner(s) can be registered for VAT as a partnership.

If you are already VAT registered under the normal VAT registration rules for business activities connected with bloodstock, your racehorse owning activities may also form part of that business. For example if you are a:

a) Breeder who races colts, fillies or home bred geldings with the intention of enhancing the value of their breeding stock.
b) Trainer who owns and retains horses to attract owners or buyers and to provide rides for apprentices, provided the number of horses is not disproportionate to the main activity of training; or a
c) Dealer who purchases and sells racehorses commercially, and who races the horses held as trading stock, provided those racehorses are available for sale.

If this is the case you do not need to register under the special rules of this scheme.

Subject to the rules of the scheme, if you are already VAT registered this activity will be added to your existing registration if carried out by the same legal entity.

Input tax recovery

Input tax is the VAT that you are charged on purchases of goods or services for use in your business.

The following are examples of Input tax that can be recovered on the following expenses where registered under the scheme:
1. Purchase of horses
2. Training fees
3. Entry & jockey fees
4. Vet and farrier
5. Nomination fees (where breeding the horses to be raced are considered as your normal method of obtaining horses to be raced)
6. Keep of Broodmares (again where this is the normal method of obtaining horses to be raced)

The above is not a definitive list of Input tax and, providing you are able to demonstrate the expense is for the purpose of your business and is covered by your sponsorship agreement, VAT on other expenses may also be recoverable.

Recovery of Input tax prior to registration

You can treat the VAT you were charged on a racehorse and any other goods purchased prior to registration as if it were input tax, provided:

You were charged the VAT no more than three years before your date of registration;

The goods are on hand at the time of registration; and

The goods are to be used for the purposes of your business.

You may treat VAT charged on services received before the date of registration (which includes tax charged on the purchase of a share in a racehorse) as if it were input tax, provided:

You received the services no more than six months before the date of registration; and

They were used for the purposes of your business.

Owners registered under The Scheme will be subject to normal periodic visits for VAT assurance purposes and will have to show they meet the conditions of The Scheme. If at any time this is not the case, repayment of input tax claimed may be required, and action taken to cancel the registration. Owners will be able to appeal any such decision to the independent VAT Tribunal.

If you would like more information relating to the scheme or would like help in obtaining registration then contact Gary Frear on 01223 728222 or email gfrear@pem.co.uk