This article considers the practical and legal elements of racehorse ownership.
A brief overview of British Horseracing History
The origins of all modern-day thoroughbreds trace back to three Arabian stallions (the Byerley Turk, the Darley Arabian and the Goldolphin Arabian) imported from the Middle East in the late 17th and 18th Centuries and being bred to English mares to produce the speed and stamina of thoroughbred that we know and love today.
Racehorse ownership and breeding used to be restricted to those with wealth and title to participate. This resulted in the Jockey Club being founded in 1750. The Jockey Club “handed over the reins” to The British Horseracing Authority (“BHA”) in 2003. The BHA is now formally known as the sport’s governing and regulatory body with the role of ensuring the continued success, development and overall control of the sport.
Considering Racehorse Ownership
Although racehorse ownership is an exciting and potentially lucrative prospect, it is also a complex industry and ownership should not be taken on lightly. It is essential to have as much knowledge of the industry as possible or at least to seek advice from those who have that knowledge. For example, the industry is subject to many rules and regulations, which are governed by the BHA. An owner may be subject to disciplinary action if such rules are not complied with.
As well as the BHA, there are a number of other associations involved within the industry and it is important to have some background knowledge of these associations in order to build up a contact base from which to seek appropriate advice and assistance.
Before making a purchase of a horse, whether outright or as part of a partnership or company set up, as detailed below, you should also consider the following:
- Seek guidance from those familiar with purchasing horses, such as a trainer or bloodstock agent.
- Check the background of the horse that you are looking to purchase to ensure it is a worthy investment. There are likely to be sales records from auctions, catalogues and also race results for the horse in question.
- Pre-purchase vetting by an independent vet before any prospective purchase is essential.
- Ensure that a sale and purchase agreement is drawn up by a legal advisor.
- Check the level of insurance appropriate for your requirements. One option, for example, is to take out a bloodstock mortality policy to insure the value of the horse. Another option is third party liability insurance in case the horse does any damage to bystanders or their property whilst at a race. Many of the policies are bespoke to racing and so it is essential for an expert broker with knowledge of the industry to assess your insurance requirements.
- The costs involved in addition to the initial purchase price. Additional costs to consider include, but are not limited to, start up registration and administration fees, training costs, running costs, tack and equipment costs, veterinary and legal costs.
- Obtain advice regarding the legal and tax implications of ownership.
- The requirement to enter into a training agreement in respect of any horse before it runs.
Different Types of Racehorse Ownership
The Racehorse Owners Association (“ROA”) is the representative body for racehorse owners in Great Britain and exists to protect owners by providing expert and impartial advice to existing owners and those considering taking the step into ownership.
It was during the 1980’s that racehorse ownership became more accessible to the general public with the introduction of commercially run racing syndicates and clubs which enabled the shared expenditure and responsibility of associated costs. Today, there are a number of ways to become involved in the ownership aspects of the sport and according to the ROA’s most recent publication of statistics in late 2013, just over 60 per cent of racehorses trained in Britain are now raced under some form of joint ownership, syndicate or partnership.
The most popular types of ownership include the following:
1. Sole ownership – The horse will be owned outright and you can often name it yourself and the horse and jockey would wear your chosen colours. You will be responsible for all costs associated with training and upkeep, although you will also enjoy the sole benefit of any prize monies won. You will have the responsibility of all key decisions and if you are not experienced in the racing industry, it would be prudent to ensure that you seek advice from licensed trainers who have the knowledge.
2. Co-ownership – a horse can be co-owned with family and friends and also colleagues.
a. A joint ownership arrangement can be set up between two and up to twelve individuals and the horse can be registered to run in a joint ownership name, or the name of one or more of the joint owners. This arrangement is different from a racing partnership as each joint owner is required to be a registered owner. Upon registration of a joint ownership arrangement, it is also necessary to declare the percentage share of each horse owned by the joint owners.
b. Racing partnership/syndicate is a multi-ownership set up for groups of between two and twenty individuals and at least two must become registered owners, or be existing owners. The two registered owners (known as nominated partners) are responsible for the set up and administration of the racing partnership and the BHA will ask the nominated partners to provide the details of the other listed partners. Under the Rules of Racing the nominated partners are treated as though they were the joint owners of the horse and are consequently jointly and severally liable for any sums due as owners. Registration costs are higher than for joint ownership. These types of partnership are often run by a trainer or a commercially based partnership where there is a manager in place with knowledge of the administrative complexities.
3. Company ownership – the horse is owned by the shareholders of a company who will appoint a registered agent to act on their behalf. There will be director and company secretary provisions and those individuals can have colours registered in their names. Foreign companies can register as a recognised company under rules in the UK. The company pays the bills rather than the individual but HM Revenue and Customs are inclined to tax that as a benefit to the director. As there are tax implications involved and the company is a separate legal entity in its own right, these complications dictate that as well as seeking advice from a company lawyer, additional prior advice should be sought from a qualified accountant.
4. Leasing – this involves the leasing of a racehorse for a set period of time and a legal agreement setting out the terms of the lease will need to be entered into. This option off-sets the cost of the outlay in purchasing a horse, however, throughout the lease the lessee is responsible for any costs incurred and also has to register as an owner. The horse can run in the lessee’s colours and can keep the prize money, or a percentage of the winnings, dependent upon the type of agreement entered into with the lessor/owner of the horse.
5. Racing clubs - you will be a member of a club enjoying some of the benefits of being an owner, but without any actual ownership rights to the horse. A one off fee is usually paid and you may get a share in the prize monies or reduced rates to attend the races and will also be able to attend the training yards. You would be involved at an affordable rate and enjoy the social benefits, but without the problems which can be incurred in having the responsibility of full or joint ownership of a horse.
Any arrangement between the parties/owners involved must be recorded in writing so as to ensure that all involved are aware of their personal and financial responsibilities, as well as recording who will be entitled to the profits, benefits and winnings going forward. It is also important to consider and record how such an arrangement will come to an end.
Racehorse ownership involves high value transactions, which can often become the subject of litigation when communications break down. It is, therefore, important to consider all possible outcomes/issues to ensure that you can safeguard against these from the outset in order to prevent such issues arising at a later date.
Once a racehorse comes to the end of its career, there are now a number of options available to it, such as alternative careers in dressage show jumping and eventing. Organisations such as Retraining of Racehorses (“ROR”) are invaluable in encouraging responsible racehorse owners and trainers to allow their ex-runners have post racing careers and it is important that this is recognised by those involved in racing to ensure the reputation and integrity of the industry is upheld in terms of horse welfare.