How do breeding shares work

The syndication of stallions rose in popularity several years ago as a result of available tax benefits and the practical benefit of common ownership of a valuable animal used for breeding. In Oklahoma, the syndication of quarter horse racing stallions is most common, but quarter horses used for other disciplines, thoroughbreds, and high-powered bulls and other blood stock are syndicated around the country.

Generally, the goal of a syndicate is to spread the risks and benefits of ownership among several individuals. An owner of a syndicate share will own an undivided interest in the animal along with the other syndicate members. Like its British competitor Thoroughbred Genetics, Equinome faced scepticism in the industry from owners and trainers who favoured conventional approaches to breeding.

So Hill looked at the price paid for yearlings and compared it to their performance. She found that buyers were paying too much for poor quality horses and that Equinome's single gene and multi-gene tests were better at predicting success.

However, what an individual will inherit can still be a genetic lottery and so you try to load the dice by having more information about the parents' DNA.

Despite the enthusiasm of equine geneticists, genetically perfect animals can still run like donkeys. So to help load the dice a little more, trainers are turning to people such as Dr Thilo Pfau, a computer scientist and expert in horse gait and lameness at the Royal Veterinary College.

A former expert in speech recognition, Pfau makes an unlikely horse boffin. But his skills of identifying patterns have proved useful in spotting the causes of lameness. Racehorses put extraordinary pressures on their legs and muscles.

When galloping, each limb has to support the equivalent of two and half times the animal's body weight. In a kg animal, that's 1. With those demands, and with rigorous training regimes, lameness is an industry-wide problem and one that is notoriously tricky to treat. A trainer or vet will watch a trotting horse to try to find the cause of lameness. That may sound straightforward, but it's not. High-speed cameras may help to identify the problems but they are expensive and you need a lot to monitor a horse in different situations.

Pfau's solution was to take motion sensors used in Hollywood animated movies to mimic human behaviour and attach them to the head, pelvis and hips of horses. The matchbox-sized sensors fed data wirelessly to a computer that analysed the gait. The software didn't just identify the cause of lameness; it also revealed if it was getting better with treatment.

That can be a real problem in veterinary medicine. Horses don't experience the placebo effect. But vets do. Studies have shown that vets are likely to see an improvement in an animal after treatment even if the behaviour and symptom are the same.

Sensors and software don't suffer from the same bias. The next phase of Pfau's work is to detect problems before they become serious. Working with the Singapore Turf Club, his team is starting a project to put sensors on racehorses over 18 months. If a horse does, we can go back and see what was happening and if there are any early signs.

As mentioned above, horses treated as stock are usually included at lower of cost and net realisable value if the cost model is chosen for biological assets and so the value of each horse has to be considered at each year end. However, as far as stallions are concerned HMRC generally accepts a rule of thumb method of valuation where they allow the cost of a stallion cost being the same as for mares mentioned previously i.

The aim of the write down is to give an acceptable approximation to the net realisable value of the stallion, although the method should not be used where the actual value of the horse is known at the year end or it would give an obviously unreasonable result e.

It should be noted that there is no automatic right down of mares in the same way as there is for stallions. It is therefore important for stud owners to take an interest in the value of their horses at each year end to ensure that where they will be relying on their financial accounts for external investment or bank funding that the stock is valued appropriately and disclosed accordingly on the business balance sheet.

Should HMRC choose to open an enquiry, one of the primary areas of interest is valuation, so evidence of realistic valuations is important both in avoiding an enquiry and in settling an enquiry. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

Lease payments should be large enough to provide the owner older party a competitive return on investment and pay for insurance, death loss, and other ownership costs. For enterprises with frequent sales, such as dairy or farrowing pigs, payments can be set up on a monthly schedule to match the sale periods. Lease payments may have to be adjusted according to the number of female animals in the herd each month, if this number fluctuates significantly. There are several ways the replacement of culled breeding animals can be handled when the herd is leased.

The owner older party either pays the tenant younger party for the replacements or credits their value against the rent due. The tenant younger party pays rent on the remaining cows owned by the owner.

Careful records should be kept of which animals are owned by each party. The lease payments decreases each year as ownership of the herd is transferred to the younger party.

Breeding livestock also can be gifted, either gradually or all at once. The same tax treatment as for gifting machinery applies.