VAT when selling a horse

Key points

• Is the horse ownership an ‘economic activity’?
• A loss claim must relate to a commercial trade.
• The hope of prize money and a profit on sale may not prove that commercial trade is being undertaken.
• The VAT scheme for racehorse owners can allow VAT refunds.
• Has output VAT been paid on sponsorship income?
• The sale of a share in a horse may be treated as a supply of services.
• The importance of the place of supply rules.

If a horse is sold by a sole trader who is in business with another activity there may be a worry that VAT will have to be charged even where the other activity is not VAT registered. This is because the sole trader VAT registration could be seen as relevant to all – in the words of the Principal VAT Directive – economic activities of the sole trader including horse ownership. If it is not clear that the horse...