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HMRC internal manual

Business Income Manual

Farming: stud farms: stallion syndicates

Since the cost of buying a successful stallion outright is prohibitive for some bloodstock breeders, ownership may be shared in a syndicate. The usual form of syndication is into forty equal shares, representing the number of mares which, traditionally, was regarded as the standard for a stallion to cover in one season. Each syndicate member contributes towards the costs of keeping the stallion and is entitled to one `nomination’ each season per share owned. The member may use the nomination to cover one of his or her own mares, or it may be sold on the open market. The shareholders appoint a committee that deal with the day to day management of the stallion.

Where the occupier of a stud farm owns a share in a stallion for the purpose of obtaining services for his or her own mares, the tax treatment will depend on whether he or she has made an election for the herd basis:

  • If no election for the herd basis has been made, the share in the animal should be treated as stock in trade and sale proceeds brought into account in the normal way. The cost of the share may be written off in line with the practice described in BIM55710.
  • If an election for the herd basis has been made, the share in the animal may be treated as part of the herd. In that case, any adjustments necessary on the sale, purchase etc of the share should be dealt with as if that share were a whole animal (see BIM55635)

Whichever treatment applies, it should be applied consistently for all shares owned.

In either case, the proceeds of any sales of nominations are treated as trading receipts. Any contribution by the stud farmer towards syndicate expenses will be an allowable trading expense.

If either:

  • the owner of the stallion share is not carrying on a trade of stud farming or horse breeding; or
  • the owner is carrying on such a trade but does not use the stallion share for the purpose of obtaining services for his own mares;

then the proceeds from the sales of nominations are taxable as miscellaneous income. An allowance for depreciation, computed on the lines described in BIM55710, may be given but if a share is sold any excess allowances should be recovered.