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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Farming: stud farms: animals used for racing

S172D, S172E Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S157, S158 Corporation Tax Act 2009 (CTA 2009)

If the occupier of a stud farm races animals bred by him or her:

  • The stud farm accounts should be credited when animals are transferred to training with the then market value of the transferred animals, under S172D ITTOIA 2005 and S157 CTA 2009. This is the statutory enactment of the case of Sharkey v Wernher [1955] 36TC215. When animals return to the stud farm after racing, the stud farm accounts should be debited with their market value, at the time of return, as if they had then been purchased at that value (S172E ITTOIA 2005 and S158 CTA 2009).
  • If an animal purchased and not bred on the stud farm is brought into the stud after racing by the occupier, the stud farm accounts should similarly be debited with the then market value of the animal as if it had then been purchased at that value.

The same treatment should be applied to a person who is a dealer in thoroughbred animals bred by him or her but on a stud farm occupied by some other person.

If a breeder transfers an animal to training and it is then returned to stud at a higher value after a successful racing career then the uplift in the market value whilst it was in training is tax free. Furthermore the value at which the animal is returned to stud is relieved over the rest of its life (see BIM55710). The valuations of animals at the dates of transfer to or from training are, therefore, significant. (See BIM55705 as regards open market valuations.)