SASHA Kerins, a partner and head of agri food with accountants Grant Thornton Ireland, gave her presentation on tax with a clear caveat on it that it was for general advice only and began by outlining the differences in taxation between what constitutes a hobby as opposed to operating as a trader.

There are a number of factors to consider, including the frequency of transactions, and the motive of the tax payer whether he/she is trading for profit or as a hobby.

HOBBY Vs BUSINESS

If transactions were about five or six a year the stud could be considered a trade more than a hobby and could be liable for income or corporate tax depending on the ownership structure. If activities are defined as a hobby, they are not taxable but there is no relief for losses or expenses.

Kerins moved on to discuss the merits of operating as a sole trader or whether to incorporate comparing tax rates, liability and pension contributions among other matters.

If a couple’s annual income was around, €90,000, she recommended incorporating the business.

Any profits earned while a horse is in training are not liable to tax, including prize money, or proceeds from the sale of a horse in training. However, any costs incurred while a horse is in training are not tax deductible.

Bloodstock bred and moved into training should be transferred out of trading stock at the carrying cost with nil liability. On retirement from racing, it returns back to the breeding stock books at original cost.

VAT

VAT – if you buy a horse currently for breeding purposes the VAT rate is 4.8%. However if you buy a horse to go into training the 9% VAT rate reverts to 13.5%. This may impact on the trade in horses for racing, sports or leisure activities.

Current farming reliefs were outlined covering stock relief (individuals) income averaging, farmland (qualifying leases) CGT retirement relief and inheritance relief.

Kerins outlined possible ways to incentivise the market in quality broodmares.

Reinvesting taxable profits from the sale of breeding stock into the purchase of a new broodmare means there would be an option for the breeder to take full deduction for the expense in the year of reinvestment.

An idea for mare depreciation similar to the scheme for stallions, where by the cost of stallion can be written off for tax purposes over four years, was floated.

Kerins concluded by outlining possible future relief on investments by “small rural breeders” and how to avail of some incentives and profit relief on sale of foals.