You advertise to promote your business and expect to recover any Input VAT you suffer in the process. But there are a number of VAT cases that say otherwise. How are you going to make a racing certainty of your position?
Straightforward advertising of products or services should be allowable (i.e. you get to claim back any VAT charged to you). But what about promoting your business’ name through an involvement in horse racing? It doesn’t have to be grand or expensive – perhaps a keen yearling or promising point- to-pointer.
But a VAT Inspector may seek to reverse any Input VAT you have claimed back on the basis that it is amusement or entertainment. So how do you convince the VAT-man?
It’s all in the mind
The key here is to demonstrate that the horse racing expenditure can be seen as a true attempt to benefit the business rather than indulge the personal interests of the proprietor. Let’s start by looking at a landmark case in the taxpayer’s favour.
Flockton Developments Limited (1987), a company which manufactured plastic storage tanks, reclaimed Input VAT on the training and upkeep of a racehorse. The VAT-man issued an assessment to recover the tax and the company appealed, contending that it had purchased the horse for promotional purposes. Indeed the main director gave evidence that this was the sole motivation, which he had in his mind when he decided to buy the horse. The Court allowed the company’s appeal. Customs did not take the case any further and the decision has been quoted in a number of subsequent cases.
The tips that can be drawn from this and the cases that followed are:
Tip 1. Have the horse or syndicate named after your company or its product. Even better if you can connect the name with your type of business in the programme.
Tip 2. Enter races near to your trading premises or within the catchment area of most of your customers. Make a note of any business that comes about as a direct result of competing. It helps if there is a reasonable chance of being successful in this objective of attracting customers.
Tip 3. Entire ownership of the horse is more appropriate than a share in one.