Guidetotaxationforthe IrishSportHorseIndustry

1 Guide to taxation for theIrish Sport Horse IndustryJuly 2008 IndexForeword by the Chairman of Horse Sport Ireland, Mr Joe Walsh2 Introduction by Grant Thornton31. taxation & accounting for sport horses in Ireland41. 1 Stallions41. 2 Foals and young Transfer to Books and records62. taxation Trading v Sole trader v Company Taxing income & trading Capital Employment taxes123. Flat-rate VAT registered farmers154. Other Stamp duty Capital gains tax (CGT) Capital acquisition tax (CAT) reliefs18 The enclosed information is an overview of taxation for the Irish Sport Horse Industry in the Republic ofIreland. It is based on the taxation legislation in operation at the time of writing.

2 grant thornton and HorseSport Ireland take no responsibility for any reliance placed by individuals on this document. Readers areasked to take advice from their local accountants before taking any action in regard to the issues ,IrishmemberofGrantThorntonInternational ,isauthorisedbytheInstituteofCharteredAc countantsinIrelandtocarryoninvestmentbus iness 2008 GrantThornton2On behalf of Horse Sport Ireland I am delighted to present thispublication Guide to taxation for the Irish Sport Horse Industry .The purpose of the publication is to provide practical and usefulinformation to the breeders of Irish Sport the world the Irish Sport Horse has always enjoyedan exceptional reputation as both a top level performer and aleisure riding horse.

3 The Irish Sport Horse industry makes asignificant contribution to the economy and to the social fabric ofIrish communities. The Irish Sport Horse industry is a growingindustry. Huge potential exists to develop competition and leisureriding markets both at home and Sport Ireland has recently been approved by the Department of Agriculture Fisheries andFood to maintain the Irish Horse Register (incorporating the Irish Sport Horse and Irish DraughtHorse Studbooks). Accordingly, Horse Sport Ireland is now responsible for devising andimplementing strategies for the development and promotion of an internationally competitiveIrish sport horse industry incorporating for the first time breeding, sport and leisure sides.

4 Theprovision of relevant information to breeders will be a priority of the organisation for the behalf of Horse Sport Ireland, I would like to thank grant thornton for their valued input tothe content of this WalshChairmanHorse Sport IrelandForeword by the Chairman of Horse Sport Ireland, Mr Joe Walsh3 Welcome to grant thornton s and Horse Sport Ireland s guide to taxation for the Irish sporthorse industry. This guide provides an overview of the general tax issues arising in this industryunder various different tax heads. We are delighted to be involved in the production of thiscomprehensive thornton are ranked as one of the leading tax planning and tax transactional advisors inIreland.

5 We have offices located in Dublin, Kildare and tax specialists can assist you in saving tax and growing your businesses. We place greatemphasis on developing personal relationships with clients. With the highest technicalproficiency, we deliver our services with the hand-holding that other firms addition, our audit & assurance service highlights issues which have a significant impact onyour business. We look beyond the audit's basic task, reporting on your financial position, to itspotential for evaluating management structure, tax arrangements, invoice procedures,information and communications systems and your policies for buying and , our specialist service portfolio includes wealth management, family business consulting,corporate finance and corporate thornton is the sixth largest accountancy firm in Ireland employing nearly 400 partnersand DohertyPartnerIntroductionContactFor further information contact a member of our teamBernard DohertyPartner, Tax, DublinT: + 353 1 6805 611F: + 353 1 6805 806E: DelaneyDirector, NewbridgeT.

6 + 353 45 44 88 50F: + 353 45 44 93 24E: ComynManager, Tax, DublinT:+35316805778F: + 353 1 6805 806E: KerinsManager, Tax, NewbridgeT: + 353 45 44 88 52F: + 353 45 44 93 24E: 20081. taxation & accounting for sport horses in Ireland1. 1 StallionsPreviously, income from stallion stud fees and associated costs were exempt for from 1 August 2008 net profits from stallion stud fees and gains on the disposal ofstallions will be liable to taxation . This applies to stud farms and stallion syndicate owners determining the taxable net profit, costs associated with maintaining the stallion can beclaimed as a deduction as well as the cost of the stallion.

7 Stallions will not be accounted for asstock-in-trade, instead the cost of the stallion will be allowed as a deduction over a 4 year period; 25% per year for four years from the date of purchase. Stallions at stud on 1 August 2008will be valued, for this purpose, based on their market value on 1 August 2008. Stallions boughtpost 1 August 2008 will be valued at their purchase price. Stallions introduced to stud, fromtraining, post 1 August 2008 should be valued at their deemed market value at the date oftransfer to stud. The Revenue Commissioners have the right to consult anyone they see fit inregard to confirming the market value of the stallion. We would suggest that a qualifiedcompetent valuer be used sport horse sales company or sport horse agent, to confirmstallion values as and when a stallion is sold or dies within the initial four year period, a full deduction can be taken, in theyear of death or sale, for the balancing amount of the initial market value cost not yet example of stallion taxation for the 12 month period to 31 December 2009 Stallion Fees: 20,000 Associated costs: 2,000 Value of stallion at 1 August 2008: 40,000 Taxable Income for the year ended 31 December 2009 Income 20,000 Less.

8 Expenses( 2,000)25% Stallion write down( 10,000)Taxable Income 8,0005 July 20081. 2 BroodmaresBroodmares will form part of the trading stock of a sport horse breeding business, with eachmare having a different carrying are required to be valued for trading stock purposes in the accounts of the ownerat the lower of cost or net realisable value. Cost is generally based on the original purchase price of the mare. If the mare wasoriginally bred by the taxpayer then the cost would include all expenses upto 1 January of the year she became three years old. Net realisable value means the market value of the mare at the accounts year depends on a number of factors mare s physical condition, bloodline, age,fertility and many more, but is very much a matter of judgement for the taxpayer.

9 Ifan expensive mare is revalued downwards on this basis, such a decision must bejustified and capable of being supported if challenged by the the mare is in foal, at the accounts year end date, her value plus the carrying value of the foalwill be carried forward as trading stock to the next accounting period. The carrying value of thefoal includes the stallion fee paid plus the cost of keep from the date of covering to the yearend a mare is bought in foal, the carrying value of the foal will be deemed to be the advertisedstallion fee, in the year of covering, plus the costs of keep since covering. The value of the marein the subsequent year will be reduced by these amounts to determine her cost Foals and young stockThe progeny also form part of the stock in trade, untilthey are sold or transferred into cost of a foal will be, the cost carried forward aspart of the mare in foal in the prior year, as describedabove, plus a full years keep for the cost of a yearling will be the carrying cost of thefoal, in the prior year, plus one years continues until 1 January when the horse is 3years old.

10 As they are deemed to be mature for taxpurposes at this Transfer to trainingSport horses would be considered in training if they were registered with a relevant sport horseassociation, Show Jumping Association of Ireland, Eventing Ireland, and also be in the careof a person touring the relevant competition circuit with that profits earned while a horse is in training are not liable to tax, including competitionwinnings or proceeds from disposal of the horse. Consequently, any costs incurred while theanimal is in training are not tax deductible. However, if stallions are providing artificialinsemination ( ) services while still in training, it is likely that the proceeds from the could be bred at stud farms that are moved to training are transferred out of the trading stockaccounts at their carrying cost, resulting in a nil liability.