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HMRC internal manual

VAT Business/Non-Business Manual

VAT registration scheme for racehorse owners: racing clubs

 

Racing clubs

There are various types of racing club. For example:

  • limited companies who sell shares in their company to finance the purchase of racehorses;
  • limited companies or partnerships who seek investors to finance the purchase of racehorses; and
  • members’ racing clubs where subscriptions finance the purchase of racehorses.

Limited company selling shares in the company

The company buys racehorses and races them in the company name. Profits may be redistributed to shareholders in the form of dividends. There may be some benefits available to the shareholders, for example visits to trainers and free entry to racecourses.

The sale of shares is an exempt supply. The benefits shareholders receive are disregarded for VAT purposes. So unless the company has other taxable business activities it can only register for VAT if it meets the conditions of the scheme set out in VBNB50050. Once registered under the scheme the company can recover as input tax any VAT it is charged for racing activities. VAT attributable to the exempt supply of shares cannot be recovered.

Racing partnership selling shares

This is a limited company or partnership offering for sale a specific number of shares in the venture. There may be some benefits available, for example visits to trainers and free entry to racecourses. Proceeds from prize money and the sale of racehorses are redistributed to the owners of shares upon termination of the partnership.

The sale of the shares in these circumstances is outside the scope of VAT. Any benefits the owners of shares receive are disregarded for VAT purposes. Unless it has other taxable activities the partnership can only register for VAT if it meets the conditions of the scheme set out in VBNB50050.

“Racing club” providing benefits to members for subscription

This is a limited company, partnership or sole proprietor calling themselves a “racing club” or having the characteristics of a club who invite others to become a member by payment of a subscription. The subscriptions are used to buy racehorses and at the end of the year surplus income is redistributed to members. The members receive benefits such as newsletters, telephone information/tipping services and visits to trainers.

A club which provides benefits to members is carrying on a business activity for VAT purposes. The subscription income is liable to VAT and the club must register for VAT if it exceeds the registration limit. Otherwise it may apply for voluntary registration. Because the club can register under the normal VAT rules the scheme for racehorse owners does not apply.

“Racing club” not providing benefits to members

This is a limited company, partnership or sole proprietor calling themselves a “racing club” or having the characteristics of a club who invite others to become a member by payment of a subscription. The subscriptions are used to buy racehorses and at the end of the year surplus income is redistributed to members. The members receive no benefits.

A club that does not provide any benefits to its members is not regarded as a business for VAT purposes. The subscriptions are therefore outside the scope of VAT. The club will only be able to register for VAT if it meets the conditions of the scheme set out in VBNB50050.