The Commissioners of Customs and Excise in Britain today asked a High Court judge to rule in a test case that trainers must pay VAT when their apprentice jockeys ride for racehorse owners.
Lawyers say a win for the VAT man will mean that trainers around the country could have millions of pounds clawed back from them in tax.
The Commissioners are challenging a tribunal ruling that trainer Ron Hodges was not liable for VAT on fees from owners when his apprentice jockeys rode in flat races and conditional jockeys took part in steeplechases.
Hodges, 59, and his wife Amanda have stables at Cedar Lodge, Charlton Adam, Somerton, Somerset.
Their big winners include Canio (Coral Golden Hurdle Final 1984), Hanakham (Sun Alliance Chase 1997), Hard To Figure (Ayr Gold Cup 1993), Teletrader (EBF Novice Hurdle Final 1987) and Wayward King, who has had recent wins at Wincanton and Newbury.
Today Mr Justice Moses, sitting in London, warned that the hearing was likely to be heavy going after confessing that the parties had got "the wrong judge for riding cases".
He warned counsel to take matters "very slowly", briefly reminisced on the bygone days when many judges knew about horse racing and described himself as "a complete ignoramus" on the subject - apart from having "a terror and fear of horses".
Jeremy Hyam, appearing for the Commissioners, argued the VAT tribunal, sitting at Bristol in November 1998, had made several legal errors.
The essential question for the court to decide was whether Hodges and his wife were liable for VAT on the supply of riding services provided by their apprentices and conditional jockeys.
If the relationship between the trainers and the jockeys amounted to a contract of employment they were liable at the standard rate.
Mr Hyam argued there was a sufficient overlap through the contract for the trainers to be liable.
Lawyers for Mr Hodges contended that agreements between a trainer and apprentice jockey did not amount to contracts of apprenticeship and their riding services to owners were not provided by the jockey on behalf of the trainer.
They contended it was neither illogical nor perverse for the tribunal to have held that no VAT was payable on riding services because they were provided by the jockey, who was not a taxable person registered for VAT, and not by the trainer.
Jeremy Wood, solicitor for the Hodges, said outside court: "This is a test case.
"If the appeal goes in favour of Customs and Excise they will go to every trainer in the land, with the possibility of recovering several millions of pounds in tax. It is a very important case."
