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HMRC internal manual

VAT Business/Non-Business Manual

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HM Revenue & Customs
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VAT registration scheme for racehorse owners: position for those registered as a racehorse owner by 31 December 1997

Scope of the scheme

From 16 March 1993 racehorse owners who:

  • were registered with Weatherbys under the Orders and Rules of Racing; and
  • made a declaration that they would actively seek income in the form of sponsorship and appearance money

were accepted as intending to carry on a business activity for VAT purposes. On this basis they were able to register for VAT.

Once registered, owners were required to account for VAT on their business income including:

  • sponsorship;
  • appearance money;
  • prize money; and
  • sales of horses.

Subject to the normal rules they could recover VAT incurred on:

  • the purchase and upkeep of racehorses; and
  • other general overhead expenses associated with ownership.

Person to be registered

Ownership of racehorses takes a number of forms. As well as sole ownership by individuals, incorporated companies or racing clubs it is quite common to have a number of people owning a part share in a racehorse. This latter form of ownership is registered with Weatherbys as a racing partnership.

In normal circumstances HMRC would expect a partnership registration to exist for VAT purposes. However, we recognised that some part owners might individually have a case for registration as sole proprietors. This was where their ownership in a number of racehorses was, in total, equivalent to one or more horses. The part owner was required to show that they met the basic Scheme requirements.

Effective date of registration

The date of the MoU (16 March 1993) was the earliest date a registration was accepted. This was also the Effective Date of Registration for applications submitted with satisfactory declarations before 31 January 1994.

After that date the normal rules for intending traders applied until 31 December 1997. From 1 January 1998, when the rules for registration were changed, there was no longer any need to register owners under intending trader conditions.

Pre-registration expenses

VAT incurred on goods, which includes racehorses, on hand at registration, and related services where the supply was made not more than six months prior to the date of registration could be treated as if it was input tax. This was claimed by the registered person on their first VAT return.

For further details see VIT VAT Input Tax VIT32000.

Failure to obtain sponsorship

The Scheme applied to owners who were actively seeking sponsorship. According to the BHA it is not unreasonable to expect an owner to find sponsorship. If, since registration, an owner has still not received anything HMRC will look at the efforts they have made to do so.

If there has been no attempt to obtain sponsorship HMRC will remind the owner, in writing, of the conditions under which they were registered for VAT. They are to be informed that if reasonable steps are not taken within the next six months:

  • their registration will be cancelled; and
  • an assessment will be issued to recover input tax previously claimed.

If HMRC is satisfied an owner has made attempts to obtain sponsorship but has met with no success we will normally inform them in writing that the position will be monitored over the current racing season.

If we are not satisfied the ‘actively seeking sponsorship’ criteria has been met during this period the registration may be cancelled from a current date. In this case, however we would not assess for input tax previously claimed.

If the ‘actively seeking sponsorship’ criterion is met but nevertheless over a period of two racing seasons an owner has not received any sponsorship income, VAT staff should make a submission to VAT Advisory Team who will consider the action to be taken. Once approved by the HMRC line manager the submission should be sent via EF to the VAT Advisory Team in line with the guidance set out in Indirect Tax – Getting advice about VAT and IPT.