VAT registration scheme for racehorse owners: recovery of input tax by racehorse owners
Input tax is the VAT a business is charged on purchases of goods or services for use in its business.
VAT that a business has been charged prior to registration can be claimed in certain circumstances - see VIT VAT Input Tax VIT32000.
Under the accounting arrangements described at VBNB52800 Weatherbys provides owners with details of expenditure on jockeys’ services and other miscellaneous fees. This includes any VAT that the owner can claim as input tax.
VAT incurred on the purchase, training and upkeep of a racehorse put to training is recoverable as input tax. This includes tax incurred during any period when it is unable to run due to injury provided there is an expectation it will run in the future. All other VAT incurred by an owner in connection with horseracing activities is to be dealt with under the normal rules.
Further general guidance on the rules about claiming input tax can be found in VIT VAT Input Tax VIT30000.
Petrol and other road fuel
An owner can recover VAT on road fuel bought for business use. If an owner buys fuel that is used both for business and private motoring they can claim the VAT they are charged on all of the fuel as input tax. However, they must pay what is known as an output tax scale charge. More information about scale charges is given in VIT VAT Input Tax VIT55700.
Meals and accommodation
Owners are not expected to recover any VAT on these expenses. However, if:
- the horse is racing some distance from the owner’s principal place of business; and
- it is unreasonable to expect the owner to travel to and from their principal place of business in one day
the owner may exceptionally recover of VAT based on the normal subsistence rules. See VIT VAT Input Tax VIT42500.
But if, for example, the reason for an overnight stay is to watch the next day’s racing (the owner’s horse having raced the day before) any VAT incurred would be non-recoverable. Meals/drinks taken at the racecourse should normally be treated as private consumption and/or business entertainment. The VAT on these meals/drinks is non-recoverable.
Owners may treat 10% of VAT incurred on their telephone bills as input tax. If an owner claims a greater business usage they should provide evidence to support their claim.
An owner whose horse has been declared to run will usually receive free admission. Where this is not the case the VAT may be recovered provided the owner holds a VAT invoice.
Sponsorship of a race
A race sponsor usually receives a package of services. This can include:
- a race bearing their name (advertising);
- car parking; and
- corporate hospitality facilities (hospitality box).
The racecourse may invoice this supply as a complete package called ‘sponsorship’ for a single charge. Or it may itemise the component parts and make a separate charge for each.
Where the cost is itemised, and customers and/or suppliers are invited, the input tax on advertising is recoverable if there is a genuine advertising benefit to the business. VAT on the other expenditure should be dealt with under the business entertainment rules. See VIT VAT Input Tax VIT43000.
Where there is a single charge it will be necessary to establish the purpose for incurring this expenditure. If, as is usual, it is both for advertising and to take customers and/or suppliers for a day at the races it will be necessary to apportion the input tax.
There is no one simple approach to this. One method would be to value the cost of the free admissions and other free facilities and express that as a percentage of the whole.
Lease of executive boxes
Some large owners and breeders lease executive boxes at racecourses. They might use them for meetings with potential customers and suppliers during racing, for example to discuss purchases and sales of horses or nominations.
They might also use them for their own personal use and for corporate entertaining. Where there is genuine business use HMRC will normally allow 50% of the VAT incurred on the lease of the box to be recovered as input tax.
If the box is also sub-leased (this charge is subject to VAT) the recoverable percentage may be increased to 60%. VAT incurred on any meals or drinks should be dealt with in accordance with the guidance on meals and accommodation already given on this page of the manual.
A stud or trainer can claim back the VAT it has been charged on trophies it displays on its premises to promote the business and attract clients. But if they claim input tax and subsequently put the trophy to a private use, for example by keeping it at home, they must account for output tax. See VBNB52600.
In all other circumstances VAT on trophies is not input tax and cannot be claimed.
An owner can recover input tax on any overhead expenses used for the purpose of their business.
Qualifying point-to-point horses
All these rules apply to qualifying point-to-point horses (see VBNB52700 for the definition of a qualifying point-to-point horse):
- The owner cannot recover VAT until the horse becomes a qualifying horse;
- Once the horse becomes a qualifying horse the owner can recover 50% of any VAT charged on its purchase provided they were charged the VAT no more than three years before their date of registration. 50% is an apportionment which recognises that the horse is used partly for business and partly for private purposes;
- An owner can recover all the VAT they are charged on the training, keep and other costs of a qualifying horse from the effective date of registration and can ignore temporary periods of absence due to illness or injury;
- An owner can only recover 50% of the VAT they are charged on training, keep and other costs in the six months prior to registration or the date a qualifying horse runs in a hunter chase;
- An owner can recover other VAT they are charged before registration subject to the rules at VIT VAT Input Tax VIT32000.
- An owner can recover in full VAT they are charged after the date of registration on the purchase or construction of fixed assets used solely for a qualifying horse. However, where for example a stable block or horse transporter is used for both qualifying and non-qualifying horses an owner must apportion the VAT to reflect the dual usage.