VAT registration scheme for racehorse owners: position for those registered as a racehorse owner after 1 January 1998
Scope of the scheme
Following the 1996/97 review owners with a racehorse registered with Weatherbys can only apply for VAT registration if:
- the racehorse is covered by a sponsorship agreement registered at Weatherbys; or
- the racehorse is covered by a trainer’s sponsorship agreement registered at Weatherbys; or
- they have received business income, for example from appearance money or sponsored number cloths (SNCs), and will continue to do so.
Person to be registered
The legal entity to be registered for VAT must be the owner of the racehorse who is registered at Weatherbys. This will be a sole proprietor, partnership or limited company. If a part share in a racehorse is held registration as a sole proprietor can only be allowed if the part ownership amounts to at least 50% of the horse. If it is less than 50% registration can only be accepted in the name of a partnership with the other part share owners.
If an owner leases a racehorse to others for racing purposes the lessee(s) should register under the Scheme. However, if a racehorse is owned by one person and races in the name of another without a leasing agreement, registration for VAT should normally be in the name of the owner.
The registration of racing clubs is covered in VBNB52750.
Expiry of sponsorship agreement
If sponsorship expires an owner can remain registered under the scheme provided they can show they are actively seeking new sponsors. There is no time limit set for an owner to arrange a new agreement. However, as a rule of thumb, it should be no longer than six months after the expiry of the old agreement.
Where the period without sponsorship is over six months the owner should confirm, in writing, the steps they are taking to obtain sponsorship.
If HMRC is not satisfied with the explanation VAT staff should make a submission to VAT Advisory Team. VAT Advisory Team will consider whether the registration should be cancelled, together with any input tax implications. 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
Sponsorship agreement does not cover all owners’ racehorses
Any racehorses not covered by sponsorship can nevertheless be included in the scheme provided sponsorship is actively being sought. If sponsorship has still not been obtained after six months the owner should be notified in writing. In the end the input tax that has been claimed may have to be apportioned.
Trainer’s sponsorship agreements
In some cases a trainer obtains sponsorship which results in payments to the owners of the horse in their yard. Provided details are lodged with Weatherbys in accordance with the Sponsorship Framework for Racehorse Owners (SFRO) this satisfies the sponsorship conditions for the purposes of registration under the scheme. This is the position even where the agreement only provides for payment to be made to the owner if their horse wins.
Sponsorship in general
The normal VAT rules in relation to sponsorship apply. This means a taxable supply takes place where the owner supplies clearly identifiable benefits to the sponsor such as:
- advertising the sponsors name or products on their colours; or
- reflecting the sponsor in the name of the racehorse.
Owner already registered for VAT
A business may already be registered for VAT under the normal rules for business activities connected with bloodstock. Their racehorse owning activities may also form part of that business.
A business does not need to register under the special rules of this scheme if it, for example:
- A breeder who races colts, fillies or home bred geldings with the intention of enhancing the value of their breeding stock;
- A trainer who owns and retains horses to attract owners or buyers and to provide rides for apprentices, provided the number of horses is not disproportionate to the main activity of training; or
- A dealer who purchases and sells racehorses commercially, and who races the horses held as trading stock, provided those racehorses are available for sale.
A business already registered for VAT which buys a racehorse for advertising and promotion purposes does not have to register separately under the scheme. Any VAT incurred is input tax and claimable subject to the normal rules.
If the racehorse is used:
- partly for advertising purposes; and
- partly as a vehicle for providing entertainment to suppliers and/or customers
input tax should be apportioned to reflect this use. Also, because they are not registered under the scheme, the business is not required to account for output tax on any prize money received.
If HMRC is unable to accept the racehorse has been purchased for a business purpose we will consider whether a business qualifies for registration under the scheme. If we think it does HMRC will take no action in respect of the past. However, we will ask the business to ensure that it notifies Weatherbys in the normal way and follows the correct accounting procedures in future.
The Horserace Betting Levy Board (HBLB) Appearance Money Scheme is designed as an incentive to racehorse owners to run their horses on specified days of the week and in particular race categories.
For the 2011 calendar year, the total value of the Scheme was £735,000, funded entirely by the HBLB. Appearance Money payments in 2011 were £100 per runner (2010: £155, subsequently reduced to £120 from July), and are confined to all runners on Sundays.
However, it is unlikely that an owner will apply for registration solely on the grounds of getting appearance money. If an application is made the owner should provide details of:
• the amount of appearance money received; and
• the proposed racing programme for the racehorse(s).
HMRC may allow registration if we are satisfied there is a real intention to run the horse(s) in races where appearance money is to be paid. The owner will normally be told that if this does not happen the registration will be cancelled, and any input tax claimed may have to be refunded to HMRC.
If HMRC is not satisfied from the evidence provided that there is a genuine intention to obtain appearance money then registration will normally be refused. Any cases of doubt, or appeals against a decision to refuse registration should be referred to VAT Advisory Team. 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.
Prize money (other than the refund of stakes/entry fees) only becomes a taxable supply once an owner is registered for VAT under the Scheme. Otherwise it is treated as outside the scope of VAT. The receipt of prize money alone does not make an owner liable to registration for VAT.