Supply and consideration ― business and non-business activities

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at how to determine whether an activity is business or non-business for VAT purposes.

For detailed commentary on the concept of a business for VAT purposes see De Voil Indirect Tax Service Division V2.2.

Business and non-business activities ― introduction

One of the fundamental pillars of VAT is the concept of ‘business’. VAT is generally only chargeable on supplies of goods and services made ‘in the course or furtherance of a business’. A supply which is non-business is not subject to VAT and VAT incurred for non-business purposes is normally not recoverable.

Whether a person is undertaking business or non-business activities may also affect the VAT liability of some of the goods and services that it purchases. For example, construction services supplied to a charity in relation to a building which will be used for non-business purposes may be zero-rated. However, the same VAT relief is not available if the building is to be used for a business purpose.

HMRC’s policy for determining whether an activity

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