High Value and Luxury Assets
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An alternative to buying a football team, being a racehorse owner allows you to combine the fun of horse racing with the possibility of making money from your investment – should your horse win a race.
Racehorse owning is not a regulated investment, such as yacht or aircraft ownership, which means purchasers need to be careful and aware of all the associated costs of ownership that may not immediately come to their attention.
Investors will find that there are a number of ways to own a racehorse ranging from sole ownership to various forms of shared ownership.
Depending on the type of horse you are interested in, the cost of purchase can range from a few thousand to millions. This route allows for purchasers to have complete ownership of the horse including exclusive rights to any winnings.
Sole ownership will put you in the company of the Queen, Sir Alex Ferguson, Wayne Rooney, and Steven Spielberg.
However, this also means that the sole owner is ultimately responsible for any training, organisation and maintenance the horse needs. Costs include training fees, veterinary fees, insurance and stabling with training costing as much as £20,000 per annum.
Owning outright can be a huge expense which is why prudent investors often buy shares to spread the risk. Loosely defined as a group of people who own horses together, syndicates are a more cost efficient and straightforward method for ownership.
There are a number of syndicates that charge a fee to set up and manage syndicates including handling daily operations, so that members can enjoy hassle free ownership. Members of syndicates get the benefit of visiting training stables, discussing the horse’s future with its trainer and watch it being exercised. Syndicates are a three-year commitment after which the horses in the syndicate are sold and the shareholders are paid out. If the horse has won races and sold for more than it was bought for, then shareholders may get a healthy margin on their investment.
Racing clubs are one of the cheapest ways to be involved in horse racing. Members of racing clubs pay for a fixed 12-month contract to follow a string of horses within the club for the year. While any prize money is distributed amongst the members, the club ultimately owns the horses and thus keeps any profits from selling them.
Each racing club has its own terms and conditions which should be reviewed carefully as they will govern the interest that members have in the horse. As a stepping stone into the world of racing, racing clubs allow members to receive many of the benefits of ownership such as the option to visit the stables and racecourses.
For business professionals interested in owning a horse, company ownership may be the answer. Company ownership by far has the most advantages on a cost-benefit analysis basis.
The benefits include the ability to name the racehorse after the company and jockeys wearing company colours as a form of advertising to give exposure to a wider audience. They can be used for client entertainment opportunities and company retreats. Best of all, VAT and training fees, the most consistent costs of ownership are reclaimable.
Like most transfer of assets, there are many ways to buy or sell a racehorse. The beauty with multiple ownership avenues is the possibility to get the same benefits for a fraction of the cost if the transaction is approached sensibly. Each method of ownership mentioned has its pros and cons. At Saracens we are well-equipped to advise you on the rights, obligations and any tax liabilities in respect of racehorse ownership.
The sale or purchase of a racehorse will ultimately come down to value, for example how much is the racehorse is worth.
We can assist in undertaking the necessary due diligence and negotiating the sale / purchase agreement to ensure that you realise the true value of the horse which can often be more sporadic than the British weather.
To talk about selling or purchasing a racehorse, please phone our London office on +44 (0) 20 3588 3500 to talk directly to one of our lawyers. Alternatively, you can request a call back and we will be in touch at a time convenient to you.
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