Horse Racing Ireland to seek VAT return on bloodstock purchases

State body Horse Racing Ireland (HRI) will ask the Government to allow racehorse owners to claim back VAT on the purchase of bloodstock in a move that is likely to meet opposition from the Department of Finance.

HRI fears that an EU court ruling, which forced the Government to increase VAT on horses to 9 per cent from 4.8 per cent from January 1st, 2015, leaves the Republic at a disadvantage to France and the UK, where, unlike here, racehorse buyers can claim back the tax.

According to HRI chief executive Brian Kavanagh, the organisation will ask Minister for Finance Paschal Donohoe in its pre-budget submission to allow racehorse owners to claim back VAT payments to bring the Republic into line with the UK and France.

However, Department of Finance officials say that changing the VAT rules for racehorse owners could have far-reaching consequences as it could encourage abuse in other industries.

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A department note states that HRI wants owners to be allowed register for VAT, so they can claim the tax back, on the basis that advertising and selling racehorses is an economic activity.

Its officials claim that doing this would allow individuals in other industries to claim VAT back “based on economic activity that is fictional or ancillary to their business”.

Operator vs consumer

Tax law in the Republic, along with all other EU countries except the UK and France, does not treat those who buy horses to race as “economic operators”, but as “final consumers”. This means that they have to pay the VAT on the significant cost of buying horses.

HRI fears that the rules impose an extra cost on racehorse owners that could discourage them from buying horses in the Republic and putting them into training here.

“We need to introduce some form of VAT-recovery scheme to bring us back into line with the situation that applies in the UK and France,” Mr Kavanagh said.

France and the UK are the main rivals to the Republic’s bloodstock and racing industries, which generate €250 million a year in exports. Mr Kavanagh acknowledged that other factors such as prize money and the standard of training also influence where an owner decides to have horses trained.

Nevertheless, he argued that the VAT rules still disadvantaged the Republic’s racing and breeding sectors at a time when they were facing an extra challenge from Brexit.