When the owner of the horse that won this year's Durban July is done popping the champagne, he'll have to attend to paying Vat on his winnings.
After all there are specific Vat implications that pertain to race horse owners.
Here's how Vat affects race horse owners
Vat affects racehorse owners in that they make the services of their race horses available to the racing operators, the Practical Vat Loose Leaf Service explains.
If the total income from these services exceeds the R1 million Vat threshold in any 12-month period, the owner must register as a Vat vendor. But if the total income is more than R50 000 in any 12-month period, the race horse owner isn't required to register, but can do so voluntarily if he so desires.
In 2008 a provision that allows for payments received by a race horse owner from the racing operators to be zero-rated for Vat purposes was introduced. In this case, the owner must show such zero-rated supplies in the applicable Block 2 of the Vat return.
Here's an example of how this vat implication works
Mr Smith owns a horse, Smoking Guns, which he races. He receives R12 000 from the racing operator for Smoking Guns' victory in a race in May. If Mr Smith is a Vat vendor, he must account for the Vat on this consideration. This works out to be R1 473.68, but due to the 2008 provision, vat on this consideration is nil.
Remember, as a Vat vendor, the race horse owner will receive consideration (an amount including Vat) from the racing operator. However, this consideration is dependent on the success of the horse that is racing (whether the horse wins or not). If the owner is a Vat vendor, he'll have to account for Vat on the consideration received.
Well there you have it. The Vat implications of being a race horse owner. Keep this in mind if you fancy getting into the horseracing industry.