As per my previous blog, keeping up with the horse racing events calendar feels like part of my day job – and I get to enjoy a bit of down time too. Again, the Grand National got me thinking about the crossover between work and play. For example, what happens if horses, or indeed jockeys, become injured during the race and an insurance claim is needed? What about proceeds from any insurance claim, or even valuing a horse in training?
Horses – and their jockeys
If the horse is owned by an individual it is considered a hobby and outside the scope of taxation. Any income from insurance proceeds is also considered to be outside the scope for tax.
If owned under a corporate umbrella or by a trainer, and they claim deductions for the running of the horse in the accounts, then the proceeds of an insurance claim would be treated as taxable income. The owner’s keep and running of the horse has to be linked to their trade being deductible.
Jockeys are more straight forward. Jockeys are automatically covered under an agreement with PRIS (Professional Riders Insurance scheme), so if they are injured and can’t ride they receive a payment through the scheme. This is viewed as a substitute for lost rides and therefore is a taxable item in their accounts. This treatment is detailed in the Jockeys Taxation Booklet, which is available here.
Whether a jockey or owner, you need to make sure you have the right cover for you and your sports horse no matter what discipline you are competing in. There are professionals at hand to advise on this.
If a horse has to be put down following a serious injury it will be fully written out the accounts. If the horse is injured and will not race again it may still be able to be sold to a third party. If you think they could be sold for, say £1,000, then that is what you write it down to in the accounts. Any loss is accounted for through the profit and loss account and tax deductible if this is part of your trade.
The value of a race horse will vary depending whether it is in form or not and on its breeding.
Valuing horses is a very broad and complex area, therefore I will be writing a blog in the future specifically on this – so watch this space!
In the meantime, if you have any queries relating to your equestrian business, contact Wilkins Kennedy to see how we can help.