Value Added Tax (VAT) is a type of sales tax that is charged on the sale of goods and services in the UK. It is a tax that is collected by the government and is used to fund public services. Racehorse owners may be required to pay a range of taxes, including VAT, on their horses and associated activities. In this article, we will explore the question of whether or not you pay VAT on racehorses.
VAT and Racing Activities
The UK government imposes VAT on certain racing activities, such as the sale of racehorses, the provision of racehorse training services and the sale of racehorse stud services. In addition, VAT may also be charged on other activities associated with racehorse ownership, such as the purchase of racehorse equipment or the hiring of racehorse transport.
Types of VAT for Racehorses
There are two types of VAT that can be applicable to racehorses and associated activities: standard rate VAT and reduced rate VAT.
- Standard Rate VAT – This is the standard rate of VAT which is applicable to most goods and services in the UK. It is currently set at 20%.
- Reduced Rate VAT – This is a reduced rate of VAT which is applicable to certain goods and services, such as the sale of horses for racing or the provision of racehorse training services. It is currently set at 5%.
Do Racehorses Attract VAT?
The sale of racehorses, as well as other activities associated with racehorse ownership, may be subject to VAT. The amount of VAT payable will depend on the type of activity and whether it is subject to the standard rate or the reduced rate of VAT.
Sale of Racehorses
The sale of racehorses is subject to VAT at the standard rate of 20%. This means that any profits made from the sale of a racehorse are subject to VAT. However, if the racehorse is sold for racing purposes then the sale is subject to reduced rate VAT of 5%.
Training Services
The provision of racehorse training services is subject to reduced rate VAT of 5%. This includes services such as training the horse to race, providing veterinary care, and providing racehorse transport services.
Stud Services
The sale of racehorse stud services is also subject to reduced rate VAT of 5%. This includes services such as breeding and studding the horse, providing veterinary care, and providing racehorse transport services.
VAT Registration
Racehorse owners who are making a profit from their activities may be required to register for VAT. This means that they must charge their customers the applicable rate of VAT on their services and submit a quarterly VAT return to HMRC.
VAT Reliefs
Racehorse owners may be eligible for certain VAT reliefs which can help to reduce the amount of tax they pay. These reliefs include the VAT Flat Rate Scheme and the VAT Margin Scheme.
VAT Flat Rate Scheme
The VAT Flat Rate Scheme enables businesses to pay a reduced rate of VAT on their sales. This reduced rate is calculated based on the type of business and the amount of turnover. Racehorse owners may be eligible for the reduced rate of 9.5%.
VAT Margin Scheme
The VAT Margin Scheme enables businesses to pay a reduced rate of VAT on the sale of second-hand goods. This reduced rate is calculated based on the difference between the purchase price and the sale price. Racehorse owners may be eligible for the reduced rate of 5%.
Conclusion
In conclusion, racehorse owners may be required to pay VAT on their horses and associated activities. The amount of VAT payable will depend on the type of activity and whether it is subject to the standard rate or the reduced rate of VAT. Racehorse owners may also be eligible for certain VAT reliefs which can help to reduce the amount of tax they pay.