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HMRC internal manual

VAT Business/Non-Business Manual

VAT registration scheme for racehorse owners: bloodstock


The principal aim of a breeder is to breed thoroughbred racehorses for sale. In order to qualify under the Rules of Racing, a horse’s pedigree must be recorded in the General Stud Book.

Not all studs have resident stallions. It is now quite common for a stud to have only brood mares. These mares visit stallions based elsewhere and return to the home stud to give birth.

The covering season, during which mares are impregnated, is from February to July in the northern hemisphere. Gestation is normally 11 months and therefore the resulting progeny will be born in the spring of the following year.

For the purpose of determining which age group they will race in, all racehorses born in the northern hemisphere share the same date of birth, which is 1 January. This applies regardless of the actual date on which they are born.

The life of a thoroughbred may typically take the following form:

  • it will be raised by a breeder; and
  • then sold either as a foal or yearling; and
  • put into training as a two year old.

If put to racing it will be with the intention of:

  • enhancing its stud potential, particularly if it races on the flat; and
  • winning prize money.

A horse will commence its racing career as a two year old on the flat. Under National Hunt racing it may be as a three year old, although horses bred for this code of racing will not normally start racing until they are four or five years of age.

Registration requirements

Breeders usually want to be VAT registered because most will be in a repayment position. A breeder must clearly show in their application to register for VAT that they are carrying on, or intend to carry on, a business activity.

This is rather than the applicant being a ‘hobby’ breeder who breeds horses for their own use and recreation rather than for sale.

Breeding is a long term activity. A mare will not produce a foal every year, and the average may not be better than one year in two. A breeder will normally need to own several mares before supplies (sale of offspring) can be made with any degree of regularity.

However, there can be exceptions to this. A breeder may acquire one or two well bred mares, have them covered by an expensive stallion and sell the offspring for considerable amounts of money. When this happens HMRC would normally accept there was a business activity and allow registration.

In cases of doubt the breeder should submit written details of their business intentions. Where subsequently a breeder is registered it should be as an intending trader.

Racing of breeding stock

Following the introduction of the Scheme HMRC accepts that breeders can engage in racing activities in the course and furtherance of business. This is where they do so with the intention of enhancing the value of their stock and/or general standing in the business. Racing stock includes colts, fillies and home bred geldings.

Where breeders have acquired non-home bred geldings for racing purposes they may still be treated as part of the VAT registration provided they comply with the conditions of the Scheme, such as in seeking sponsorship.


A breeder may want a horse bred by the business to be raced, but without having to meet the expense personally. In that case the horse may be leased to a third party for racing. For example, a breeding company may lease a horse to a director or shareholders.

Any lease must be registered with the British Horseracing Authority. If the lease is for a consideration anywhere in the EC it is a taxable supply of services in the course of the breeder’s business. However, any VAT incurred on the training and racing expenses is not input tax to the breeding company.

Stallion nominations

The sale of a nomination is a taxable supply of services in the UK and VAT is chargeable if the vendor is registered. However, free nominations may be provided early in the stud life of a stallion to increase the progeny and hopefully its reputation. These free supplies are treated as outside the scope of VAT.

Guidance on the tax point rules that apply to stallion nominations can be found in VATTOS Time of Supply.

Stallion syndicates

Colts which are to become stallions standing at stud are often syndicated. Stallion syndicates should not to be confused with racing syndicates.

A syndicated stallion usually comprises of forty shares. The purchase of one share entitles the owner to one nomination. A nomination is the right to send a mare to be covered by the stallion each breeding season.

The sale of a share in a stallion is a supply of services. If it is made by a taxable person whose breeding activity is carried on in the course of business it is a standard rated supply. This applies even if the stallion is standing elsewhere within the EC or in a non-EC country.

The sale of a whole horse by all the shareholders simultaneously is a supply of goods. If any of the shareholders are registered and selling by way of business, this is a standard rated supply, except where it is:

  • zero rated on export to a non-EC country;
  • zero rated as an intra-EC supply to a VAT registered buyer within the EC and who will be liable to acquisition VAT in the Member State of arrival; or
  • outside the scope of UK VAT being based abroad at the time of the sale.

It is becoming common for shares to be purchased by instalments. If the shareholder acquires all the rights to the share before the stallion commences stud duties VAT is due in full at that time.

However, the original share owner may withhold some of the rights against payment of future instalments. This might be by disallowing the use of the stallion in his second season until the next instalment is paid. In that case VAT will not be due until the deferred payments are received or a VAT invoice is issued for them.

Stallion syndicate nominations

When a syndicate is formed a secretary, usually a bloodstock agency or firm of solicitors, is appointed. The secretary looks after the day-to-day affairs such as maintaining the register of members and recording changes in the sale of nominations.

The secretary is also responsible for paying keep charges to the stud at which the stallion stands. The shareholders contribute, according to the number of shares they hold, to a central fund out of which the secretary pays the expenses.

Syndicates selling additional nominations above the registration threshold have to register as a partnership.

As an alternative to registering the syndicate secretary can, provided they are themselves VAT registered, be accepted as an agent acting in their own name on behalf of the syndicate. Under these arrangements the secretary is required to raise an invoice in their own name for the full value of the nomination plus VAT.

Those members who are VAT registered are required to provide the secretary with VAT invoices for their share, which the secretary can use to recover the VAT element as input tax. The tax point for the supply by the member to the secretary is the same as that for the supply by the secretary to the buyer of the nomination.

The secretary may recover input tax on costs incurred on behalf of the syndicate subject to the normal rules. Stud costs must be charged on by secretary to the members who, in turn, will be able to recover the VAT if they are registered.

A stud farm may receive nominations in part consideration of the stallion’s keep. This represents a barter of services between the syndicate (or secretary if acting as the syndicate’s agent) and the stud. VAT is due on each of the supplies. Details of an agreement with the Thoroughbred Breeders Association on “Keeping of Stallions at Stud” can be found in Notice 700/57 Administrative agreements entered into with trade bodies

Overseas mares visiting UK stallions

For the purposes of establishing the place of supply of services, stallion nominations and the covering of mares is treated as ‘work carried out on goods’. For further guidance on this and other place of supply issues affecting racehorses see Notice 741 Place of supply of services (before 1 January 2010) and Notice 741 Place of supply of services (from 1 January 2010).

See also VATPOSS Place of Supply (Services).


The normal VAT rules for transporting goods apply to the transport of horses. For further information see Notice 744B Freight transport and associated services.


(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)