Problems for Non Domiciled Owners

This article is aimed at pointing out the issues to breeders and owners rather than giving detailed advice on the convoluted rules relating to the taxation of people who are resident in the UK but do not have a tax domicile here – colloquially known as Resident Non Doms (RNDs).

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Penelope Lang
Published: 28 Feb 2022 Updated: 11 Aug 2022

UK taxation is notoriously complicated and not least in the area of the taxation of people living in the UK who have a tax domicile outside of the UK.

This article is aimed at pointing out the issues to breeders and owners rather than giving detailed advice on the convoluted rules relating to the taxation of people who are resident in the UK but do not have a tax domicile here – colloquially known as Resident Non Doms (RNDs).

The rules apply to someone who, for example, was of Hong Kong parentage and background but moved to live in the UK within the last 10 years.

The immediate reaction is to ask what this has to do with breeding or racing?

Over the last 15 years the rules relating to bringing in funds and assets have changed.  It has always been the case that capital accumulated when the RND was non resident can be brought into the UK free of tax. 

Before 6 April 2008 an RND did not need to pay tax on money earned outside of the UK which was not bought into the UK. The rules started to become more onerous but until 2012 it was possible to bring assets into the UK without paying tax in the UK.  Thus a RND could bring in a horse, have it trained in the UK and then sell it outside the UK without paying any tax.  It was also quite possible to make sure training fees could be paid without an onerous tax charge.  In 2012 the rules became more onerous with the introduction of tax on assets, including horses, bought into the UK.

Historically, it was perfectly legitimate to use companies and other means to make sure training fees were funded in a tax efficient manner.  The rules have changed so this is no longer possible.

It used to be that the non domicile status was retained for life in respect of taxation (with the exception of Inheritance tax) as long as the person did not decide to settle permanently in the UK and acquire a UK domicile of choice. From 2017, a person effectively becomes domiciled in the UK for all tax purposes once they have been resident for 15 out of the last 20 years.

A horse can be bought into the UK for 275 days over its lifetime without giving rise to a charge to tax.  Consequently, an RND owner can have a horse trained in Ireland and, provided it does not spend more than 275 days in the UK over its lifetime, there will be no charge to tax on its importation. 

The same applies to horses bought into the UK to be covered by a stallion standing in the UK.

The risks to the British Thoroughbred industry as the result of these rules are obvious.

Business Investment Relief

There is a potential solution for breeders in the form of Business Investment Relief (BIR), which was introduced in 2012.  RNDs can invest in BIR companies, which can be owned 100% by the RND, who will not be taxable on the funds brought into the UK to invest in the BIR company, provided specific rules are met.

The policy decision behind the introduction of BIR was to encourage foreign money to come into the UK and be used to generate profits subject to corporation tax.

The BIR company has to be run commercially with a view to profit and so the normal rules apply in that the stud business has to have good enough mares such that it is capable of making a profit.

One problem with BIR companies is that profits from racing are not normally taxable in the UK.  Consequently, HMRC will not allow BIR for a company whose business relates to owning and running or leasing horses in training as profits relating to horses in training are not normally subject to corporation tax.

Like most areas of tax law there are shades of grey and it may be possible to make a genuine business case for a company that races home bred fillies before putting them in foal.

Needless to say, the BIR legislation is complex, so there are plenty of details that need consideration.

One big advantage of the BIR legislation is that it is possible to apply for HMRC clearance before bringing the money into the UK and making the investment into the BIR company.

Applying for clearance is inherently a straightforward process but requires a lot of thought and preparation.  The clearance application should be prepared with the benefit of a detailed business plan showing how the objectives of the company will be met. 


Continuous changes to the rules surrounding the taxation of RNDs have made it much more difficult for RND owners to have horses trained in the UK, putting UK trainers at a competitive disadvantage.

It may be possible to take advantage of the specific reliefs available but it requires effort to access the reliefs and vigilance to make sure the rules to preserve the relief are not breached.

REF: 22028299

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.

The tax treatment depends on the individual circumstances of each client and may be subject to change in future.

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This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.