Example: Horses and trotting

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Peder is a salary recipient and owns a smallholding where he lets land. As a trotting enthusiast, he wants to see whether it is possible to train one or more hoses which could win prizes on the trotting track. Here, you can see how he manages his expenses and income during the start-up years.

For reasons of space, only certain combined items have been completed in the voucher summary in the forms. The examples show the scope of the commercial activity, but not how any taxation of the individual items will be carried out. The example also does not show value added tax or registration in the VAT Register. For more information, see under “Industry”.

Year 1 - Fitting out of stalls and purchase of foals

Peder is a salary recipient and owns a smallholding where he lets land. He is interested in trotting and wants to see whether it is possible to train one or more hoses which could win prizes on the trotting track. He purchases three foals of reasonably good breeding.

He believes and hopes this will eventually become an income-generating activity. He is aware that he can claim deductions for his costs for up to five start-up years if he is successful and the trotting project goes so well that he will be seen as an “enterprise” by the tax authorities. He therefore decides that from his first year he will retain his vouchers and complete form RF-1298 Starting a business - Summary of vouchers.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of building supplies - nails, screws, etc.

 

2,800

 

2

Purchase of oats   

 

5,300

 

3

Purchase of hay   

 

4,600

 

4

Purchase of equipment for the horses 

 

5,000

 

5

Purchase of three foals

 

90,000

 

 (The purchase of foals is not an ordinary cost from a tax perspective, but will still be included in order to document the activity.)

Year 2

During year 2, Peder buys more equipment plus feed for the horses.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of miscellaneous equipment 

 

15,000

 

2

Purchase of feed  

 

15,000

 

3

Purchase of sulky (a racing cart)  

 

12.000

 

4

Payments for veterinary surgeon and medicines   

 

4,000

 
Year 3

During year 3, one of the horses suffers an injury and has to be destroyed. The other two horses are fed and trained. A professional trainer is hired for a while.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of feed 

 

20,000

 

2

Payments to trainer

 

21,000

 

3

Settlement for slaughter of one horse  

 6,000

 

 

4

Payments for veterinary surgeon and medicines   

 

5,000

 Year 4

The two horses are now promising well-trained three year-olds and starting on the trotting track. They win more monetary prizes on betting races.

Peder realises that the venture is generating a profit. However, he is aware that it is a condition for getting his venture approved as “taxable activity” that the activity is likely to generate a profit over time. As trotting prizes are an uncertain source of income and the horses are so young, he therefore decides to wait another year before deciding whether or not to submit an income statement.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of feed 

 

20,000

 

2

Payments to trainer

 

30,000

 

3

Miscellaneous prizes  

 90,000

 

 

4

Payments for veterinary surgeon and medicines   

 

8,000

 

Year 5

In year 5, the horses continue their success. The total prize money now amounts to NOK 380,000, while total costs amount to NOK 90,000. The net income/profit is NOK 290,000.

Over the coming years, Peder now expects the horses to win at least as much prize money as he won in year 5, and that he will therefore meet the condition for the horse team being seen as taxable activity. He prepares a full set of accounts for year 5, submits an income statement and transfers the result from the income statement to his tax return.

Together with the income statement, he submits form RF-1298 RF-1298 Starting a business - summary of vouchers with an overview of vouchers for each of the four previous start-up years.
 
The tax office will now assess whether Peder meets the conditions for running a taxable activity. If so, they will then assess when the activity actually started and whether there are any grounds for amending the tax assessments for previous income years.

If the conditions are met, Peder's tax assessment will be amended for the start-up years that are approved, with the changes to taxable income which the tax office deems relevant following an assessment of the submitted voucher summaries and any dialogue with Anne.

See also the Wizard for tax and duty questions in the equine sector (PDF).

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