Setting up a syndicate has become a popular way of spreading the cost of producing top quality competition horses. There are various ways a syndicate can be formed but in basic terms it is a division of ownership. Each member contributes a portion of the cost to purchase and/or maintain a horse or horses.
The benefits of syndication include:
• reducing the risk of ownership for the members; and
• providing the rider with funds to purchase a horse that may otherwise be unattainable.
In some cases an owner already has a horse and is looking for additional contributions to help fund the horse’s future development. In this case, the syndicate does not own the horse and the income can either be a monthly contribution or a lump sum to cover say one to two years.
It is essential to have a robust syndicate agreement tailored to the wishes of the members and the nominated rider. Some of the important areas to be included in the agreement are:
• The member’s interests, rights and obligations.
• Identification of the horse(s) and where they will be kept.
• The share structure and how and when they can be transferred.
• Who the syndicate manager will be and what his/her duties are and any compensation.
• Provision for the tax treatment of the syndicate.
• What insurance cover is required for each horse.
• What happens if a member dies or the rider is injured and unable to continue training the horse.
• Any timelines for sales of the horse(s) or if the syndicate will terminate.
In practical terms the rider will invoice the syndicate for training and livery costs as well as other specific costs which are often disbursed at cost such as farrier, vet and entry fees. Any competition prize money is income of the syndicate as is the sale proceeds if the syndicate owns the horse being sold.
If the syndicate is set up with the purpose of buying and selling horses with a view to making a profit, then the syndicate will be treated as trading. Depending on the turnover, it may be required to register for VAT or may voluntarily opt to register, and will also be subject to income tax or corporation tax.
The structure of the syndicate will which tax regime the profits/losses fall into. If the syndicate is established as a partnership then the partnership will declare the profit/loss and allocate this to the members to include in their personal tax returns, with the individual members liable to any tax due. If the syndicate is a limited company then the company will declare the profit/loss and be liable to pay any corporation tax due.
If the purpose of the syndicate is to allow individuals who are passionate about horses to become more involved in the thrills and spills of owning competition horses then their tax position maybe neutral with no requirement to register for VAT or declare any profit or losses.
If you require further information on the tax implications of an equestrian syndicate, please contact Lucie Hammond at Hazlewoods LLP on 01242 680000 or email@example.com