Find out if you can register for VAT under the VAT registration scheme for racehorse owners.
This notice cancels and replaces Notice 700/67 (January 2002).
1.1 What this notice is about
Following an agreement with the thoroughbred horse racing and breeding industry a scheme known as the VAT registration scheme for racehorse owners was introduced on 16 March 1993. If you meet the conditions of the scheme we will accept that racehorse ownership is a business activity. You can therefore register for VAT and recover some of the VAT you’re charged on your expenses as input tax. You can find further information about input tax in section 4.
This notice describes the arrangements for registering owners of racehorses and point-to-point horses under the scheme. Owners may include:
- racing clubs
1.2 What’s changed
Paragraph 1.1 has been amended to include ‘syndicates’ in the list of owners.
1.3 Conditions for registering under the scheme
You can apply for VAT registration under the scheme if you’re registered as an owner at Weatherbys and you either:
- own a horse or horses covered by a sponsorship agreement registered at Weatherbys
- own a horse or horses covered by a trainer’s sponsorship agreement registered at Weatherbys
- can show you have received, and will continue to receive, business income for example from appearance money or sponsored number cloths (SNCs) from your horse racing activities
There are special arrangements for owners of point-to-point horses that qualify for racing in hunter chases. You can find further information about this in section 6.
2. Registering for VAT
2.1 How to register under the scheme
To register under the scheme you will need to take the following steps:
|1||Obtain a VAT1 registration form|
|2||Ask Weatherbys for a copy of form D1 (if you’re an individual owner) or D2 (for partnerships)|
|3||Complete the D form to confirm you have a sponsorship agreement or have received business income from racehorses you currently own|
|4||Send the form to: VAT Declarations, Weatherbys, Sanders Road, Wellingborough, Northants, NN8 4BX|
|5||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 forms to the address on the VAT1 registration form|
If your registration is approved HMRC will send you your VAT registration number. We’ll also tell you your effective date of registration which will normally be the date the completed D form was received at Weatherbys.
2.2 Legal entity
Only the owner of a racehorse registered at Weatherbys may register for VAT under the scheme. The registered owner can be a sole proprietor, partnership or limited company. If you own a part share in a racehorse you can register for VAT if you own at least 50%, otherwise you can only register as a partnership with the other part share owners. You can find information about the registration arrangements for racing clubs and similar organisations in section 7.
2.3 If you’re already VAT-registered outside the scheme
You may already be registered for VAT under the normal VAT registration rules for business activities connected with bloodstock. And your racehorse owning activities may also form part of that business for example if you’re a:
- breeder who races colts, fillies or home bred geldings with the intention of enhancing the value of their breeding stock
- trainer who owns and keeps horses to attract owners or buyers and to provide rides for apprentices, as long as the number of horses is not disproportionate to the main activity of training
- dealer who buys and sells racehorses commercially, and who races the horses held as trading stock, as long as those racehorses are available for sale
If this is the case then you do not need to register under the special rules of this scheme.
Alternatively you may be registered for VAT for a business activity unconnected with bloodstock or your ownership of racehorses may not be regarded as part of your normal bloodstock related business. HMRC will normally only accept that a racehorse forms part of your existing business if you can show the horse was bought for business purposes, for example, it advertises your business.
However, provided all the conditions of the scheme are met, any horses you own which are not part of your normal business, may still be treated as part of your VAT registration.
Remember, you cannot use the scheme if you have less than a 50% share in a horse. But if you meet the conditions of the scheme you and the other part owners can register for VAT as a partnership.
3.1 Racehorses without sponsorship agreements
If some of your racehorses are not covered by a sponsorship agreement, you can treat them as part of your VAT registration but only if you can show you’re actively seeking sponsorship for them.
3.2 Sponsorship payments dependent on your horse winning
This still satisfies the sponsorship conditions of the scheme.
3.3 When your sponsorship agreement ends
If, after registration, you lose your source of sponsorship, you will be able to retain your VAT registration if you can show you’re actively seeking new sponsorship.
4. Input tax recovery
4.1 Input tax
Input tax is the VAT you’re charged on purchases of goods or services for use in your business.
4.2 What you can recover as input tax
You can recover as input tax the VAT you’re charged on the purchase, training and upkeep of a racehorse and any overhead expenses used for the purpose of your business.
You may use goods or services partly for the purpose of your horse racing activities and partly for non-business (or private) purposes. Where this is the case you can treat a fair and reasonable proportion of the VAT you’ve been charged as input tax.
4.3 Business entertainment expenses
You cannot recover input tax on goods or services used for business entertainment including free hospitality provided to business guests. You’ll find further information about this in Business entertainment (VAT Notice 700/65).
4.4 VAT on petrol and other road fuel purchases
You can recover the VAT you’re charged on road fuel bought for business use. If you buy road fuel and it’s used for both business and private motoring, you can recover the VAT you’re charged on all of the fuel as input tax, but you must pay what is known as an output tax scale charge. You can find further information about scale charges in Motoring expenses (VAT Notice 700/64).
4.5 VAT on trophies
If you run a business as a stud or trainer, you can recover the VAT you’ve been charged on trophies you display on your premises to promote the business and attract clients. But if you claim input tax and later put the trophy to a private use, for example, by taking it home to be kept, you must account for output tax (you can find further information about output tax in section 5). Otherwise, VAT on trophies is not input tax and is not recoverable.
4.6 Recovering VAT you’ve been charged before you registered
You may treat the VAT you were charged on a racehorse and any other goods purchased before the date of registration as if it were input tax, as long as:
- you were charged the VAT no more than 4 years before your date of registration
- the goods are on hand at the time of registration
- 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 VAT charged on the purchase of a share in a racehorse) as if it were input tax as long as:
- you received the services no more than 6 months before the date of registration
- they were used for the purposes of your business
4.7 Input tax notified to you by Weatherbys
Under the accounting arrangements described in paragraph 5.6 Weatherbys provide owners with details of certain expenditure on jockeys’ services, miscellaneous fees. This includes any VAT which you can claim as input tax.
5. Accounting for output tax
5.1 Output tax
Output tax is the VAT a registered business must charge and account for on the taxable supplies of goods and services it makes in the course of its business.
5.2 Accounting for output tax
If you’re registered under the scheme, you must account for output tax on the sponsorship income, prize money and appearance money you receive. You can find further information about additional output tax rules applying to point-to-point horses in paragraph 6.5.
5.3 Selling a racehorse
If you sell a horse or part share in a horse included as part of your business you must normally charge and account for VAT on the full selling price.
5.4 Selling a racehorse where no VAT was charged on the purchase price
If you were not charged VAT on the purchase, you may use the special margin scheme for second-hand goods. This allows you to account for VAT on the profit margin rather than the full selling price. You will find more information about the margin scheme in VAT Notice 718: the Margin Scheme and global accounting.
5.5 If you give a horse away or put it to non-business use
You must account for VAT if you recovered input tax on the original purchase. The value for VAT is the open market value at the time the non-business use occurs or the horse is disposed of. If you are not certain of the open market value you should ask a bloodstock agent for a valuation.
5.6 Accounting arrangements provided by Weatherbys
Weatherbys operate a self-billing system for prize money and appearance money. You should immediately advise Weatherbys of your registration details when you register or, if you cancel your registration, the date of de-registration. Weatherbys issue owners with a monthly statement known as a ‘transaction analysis summary’. This shows both:
- the VAT payable on prize money and appearance money, which you must declare as output tax in your VAT account
- details of your expenditure on jockeys’ services, miscellaneous fees and the amount of VAT on each service, which you can claim as input tax
6. Point-to-point horses
6.1 A qualifying point-to-point horse
This is a horse that you have a sponsorship agreement and is entered in a hunter chase. If you obtain a qualifying horse it will not lose that status if it is covered by a sponsorship agreement and your intention is for it to compete in hunter chases in the year of purchase.
6.2 How to register for VAT under the scheme
If you own a qualifying horse, you will be able to register for VAT for the Hunter Chasing season (January to June). You should follow the registration procedure described in paragraph 2.1. The effective date for VAT registration purposes will be the date of the first race the horse is entered for.
6.3 If you’re already registered for VAT
You do not need to apply for separate registration if you’re already registered for VAT. However, you must still complete form D1 or D2, as appropriate, see paragraph 2.1 and notify HMRC by calling the VAT general enquiries helpline.
6.4 What happens at the end of a Hunter Chasing season
You can continue with your VAT registration at the end of the Hunter Chasing season if both:
- you can show your intention is to enter the horse in hunter chases in the following season
- your existing sponsorship agreement is to continue, or you intend to obtain sponsorship before the horse competes in its first race in the new season
Otherwise your registration will be cancelled or, if the registration is continuing for other purposes, you will not be able to recover any VAT you are charged in connection with the horse.
6.5 Output tax
In addition to the information on output tax in section 5, all the following rules apply to qualifying point-to-point horses:
- you must charge VAT on the sale of a qualifying horse if you bred the horse and recovered VAT on the breeding cost
- no VAT is due on the sale of a non-qualifying horse if no VAT has been recovered in respect of it
- if your horse ceases to be a qualifying horse, for example because it’s put to a permanent non-business use, you must account for output tax but only on 50% of the open market value
6.6 Input tax
In addition to the information on input tax in section 4, all the following rules also apply to qualifying point-to-point horses:
- you cannot recover VAT until the horse becomes a qualifying horse
- once the horse becomes a qualifying horse you can recover 50% of any VAT charged on its purchase provided you were charged the VAT no more than 3 years before your date of registration, (50% is a rule of thumb apportionment which recognises that the horse is used partly for business and partly for private purposes)
- you can recover all the VAT you’re charged on the training, keep and other costs of a qualifying horse from the effective date of registration (you can ignore temporary periods of absences due to illness or injury)
- you can only recover 50% of VAT you’re charged on training, keep and other costs in the 6 months prior to registration, or the date a qualifying horse runs in a hunter chase
- you can recover other VAT you’re charged before registration subject to the time limits described in paragraph 4.6
- you can recover in full VAT you’re charged after the date of registration on the purchase or construction of fixed assets used solely for a qualifying horse, but, where for example, a stable block or horse transporter is used for both qualifying and non-qualifying horses, you must apportion the VAT to reflect the dual usage
7. Racing clubs
There are various types of racing clubs. For example:
- limited companies who sell shares in their company to finance the purchase of racehorses
- limited companies or partnerships who seek investors to finance the purchase of racehorses
- members racing clubs where subscriptions finance the purchase of racehorses
7.1 Limited company selling shares in the company
The company purchases racehorses and races them in the company name. Profits may be redistributed to shareholders in the form of dividends. There may be some benefits available to the shareholders, for example, visits to trainers and free entry to racecourses.
(b) VAT consequences
The sale of shares is an exempt supply. The benefits shareholders receive are disregarded for VAT purposes. So, unless the company has other taxable business activities, it can only register for VAT if it meets the conditions of the scheme as set out in paragraph 1.3. Once registered under the scheme the company can recover as input tax any VAT it is charged for racing activities. But VAT attributable to the exempt supply of shares cannot be recovered.
7.2 Racing partnership selling shares
This is a limited company or partnership offering for sale a specific number of shares in the venture. There may be some benefits available, for example, visits to trainers and free entry to racecourses. Proceeds from prize money and sale of racehorses are redistributed to the owners of shares upon termination of the partnership.
(b) VAT consequences
The sale of the shares in these circumstances is outside the scope of VAT and any benefits the owners of shares receive are disregarded for VAT purposes. Unless it has other taxable business activities the partnership can only register for VAT if it meets the conditions of the scheme set out in paragraph 1.3.
7.3 Racing club providing benefits to members for subscription
This is a limited company, partnership or sole proprietor calling themselves a racing club or having the characteristics of a club, who invite others to become a member by payment of a subscription. The subscriptions are used for purchasing racehorses, and at the end of the year surplus income is redistributed to members. The members receive benefits, such as newsletters, telephone information or tipping service and visits to trainers.
(b) VAT consequences
A club, which provides benefits to members, is carrying on a business activity for VAT purposes. The subscription income is liable to VAT, and the club must register for VAT if it exceeds the registration limit. Otherwise it may apply for voluntary registration. Because the club can register under the normal VAT rules the scheme for racehorse owners does not apply.
7.4 Racing club not providing benefits to members
This is a limited company, partnership or sole proprietor calling themselves a racing club or having the characteristics of a club, who invite others to become a member by payment of a subscription. The subscriptions are used for purchasing racehorses, and at the end of the year surplus income is redistributed to members. The members receive no benefits.
(b) VAT consequences
A club that does not provide any benefits to its members is not regarded as a business for VAT purposes. The subscriptions are therefore outside the scope of VAT. The club will only be able to register for VAT if it meets the conditions of the scheme set out in paragraph 1.3.
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