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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Farming: stud farms: overview

S9 Income Tax (Trading and Other Income) Act 2005, S996(2)(b) Income Tax Act 2007, S36 Corporation Tax Act 2009, S1125(2)(b) Corporation Tax Act 2010

Stud farming, which in these paragraphs is taken to mean the occupation of land for the purpose of breeding thoroughbred horses, is a very expensive and high-risk activity. In some cases it may be carried on by wealthy individuals essentially as an adjunct to their racing activities. Nevertheless, for tax purposes it is treated as farming and thus as the carrying on of a trade regardless of its commercial viability (but see BIM55725 as regards relief for losses).

Horse racing, however, is not a taxable activity. Where, as is often the case, a stud farmer also races horses, considerable care may therefore be needed to ensure that the division between the two activities has been correctly made. In particular, attention should be given to any transfers of animals from the stud farm to training (that is, being kept for the purpose of racing) or vice versa (see BIM55715).