SARS & HORSES

With sales time upon us and provisional tax date fast approaching it is worth sharing with clan members the struggle I am engaged in with SARS over my former racehorse ownership activities.

I owned horses and shares therein ( about 50 animals by my estimate ) from 1978 until I canned it for good in June 2011. The 'killer' was the earning potential when measured against cost of keep. The simple issue is that it has become near impossible to break even or show a profit from any horse outside of a Grade 1 performer. And we all know how hard they are to find!

The long and short of it is this ( and I'll keep it VERY short so as not to bore readers ) :

Step 1 :

SARS has invoked the 'ring fencing' clause and disallowed IN TOTAL my depreciation, scrapping and keep costs for the tax year ended February 2012 - my last year as an owner. I have objected.

Step 2 :

SARS then re-visited the previous 4 years as well and has now decided to disallow them too! We have objected to this as well.

This matter is far from finalised but I find it scary that legitimately incurred costs might be retrospectively disallowed.

I am also apprehensive regarding SARS' interpretation of ring fencing - in correspondence to me they dogmatically insist, amongst other inaccuracies, that racehorse ownership is a 'supect trade' ; a fact emphatically denied in the racing industry's guide to the taxation of racehorses.

I wonder if any other owners are experiencing similar difficulties?

If SARS gets this to stick then racing will, at last, have effectively ruined me.

Been through the hoops with those clowns...... paid capital gains on the one good horse i owned when i sold it but they were unwilling to take my loses into account on the previous soup meats i owned. If it is not registered as a business then you pay when you make profit but screw you when it comes to claiming back loses...........

@Garrick:

'
I wonder if any other owners are experiencing similar difficulties?

If SARS gets this to stick then racing will, at last, have effectively ruined me.'

Aren't these the type of issues that the RA should have been addressing with SARS?

Agree with Tigershark. However, they are seen as clowns as horseracing is kept so much in the dark and there is wide-spread ignorance about it.

The industry is being sold short. After all, one of the biggest owners now had been an inspector with SARS; surely, he could have made some representations to his former colleagues for the interest of the 'sport'?

@Garrick - is this becasue you owned them personally?

If they were owned by a company and the nature of business was racing, they would not be able to ring fence the losses. Personally they will be able to as there are various "suspect trades" that people have used over the years to reduce their income earned.

There are different tax rates for a business & private speculator, i never wanted my hobby to be a business, the way to go is to register a business and let it run as such.

Tigershark Wrote:

---

> There are different tax rates for a business &
> private speculator, i never wanted my hobby to be
> a business, the way to go is to register a
> business and let it run as such.


100%

register that business in Guernsey or Jersey?...heh heh

so I take it Garrick you're not coming to the sales complex tonight?

Don - Yes I am. But just for the 'night out'. The evening will end with a short prayer meeting in the car park to give thanks for not buying anything!

Richie - If you read the Tax Guide put out by the TBA you will see that 'how' you owned them makes no difference. The nub of the issue - according to their guidelines - is :

1.) Racehorse ownership must not be a suspect trade - which the handbook adamantly declares it is not.

2.) There must be a reasonable expectation that taxable income will be generated within a reasonable time period. ( In my case taxable income WAS generated by the venture so it is difficult to fathom where the SARS stance [ apart from being a rapacious appetite for tax revenue ] is coming from!

2.) There must be a reasonable expectation that taxable income will be generated within a reasonable time period

2.) There must be a reasonable expectation that taxable income will be generated within a reasonable time period:D

Come on, if 3% of horses make a return then thats a high %....... Owning is worse than punting....

what exactly constitutes 'suspect trade' in horse ownership - ? how does this differ from owning i.e. a speedboat? do hedge fund companies also have that declaration in their fine print '....is not a suspect trade', or any other type of investment for that matter?