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HMRC internal manual

VAT Business/Non-Business Manual

HM Revenue & Customs
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VAT Business and Non-Business activities: what are business and non-business activities?

Neither UK nor EC law provides an exhaustive definition or test for working out whether an activity is business. As a result the meaning of “business” and “economic activity” has emerged from a body of case law.

If is not one of the deemed businesses under Section 94 of the VAT Act 1994 (VBNB24000), you will need to apply the business test to decide if an activity is to be treated as a business. This test comes from decisions of the VAT Tribunals and other courts that have looked at the business question. (VBNB22000).

A number of cases have looked at the meaning of business and given rise to the business test. The two most important UK cases are Morrison’s Academy Boarding Houses Association and Lord Fisher. (VBNB72050)

Morrison’s Academy is a key case. It marked a shift from defining business purely in terms of profit. It is still frequently quoted. The decision in Morrison’s Academy was based on a number of principles which were repeated and added to by Customs’ Counsel in the case of Lord Fisher. For this reason the business test that emerged from this case is usually known as the Fisher test.

Another important case is St Paul’s Community Project Ltd (VBNB72050). The provision of nursery and crèche facilities by charities, along the same lines as those in St Paul’s Community Project Ltd, is not a business activity for VAT purposes.

An important case is Vereniging Noordelijke Land-en Tuinbouw Organisatie (VNLTO) (VBNB72050). The European Court of Justice (CJEU) stated that ‘business’ extends beyond economic activities giving rise to supplies within the scope of VAT. It also includes any activity that forms part of the wider purpose of the taxable person’s undertaking or enterprise. This includes even those activities that are not economic activities (such as those outside the scope of VAT), and that are not normally regarded as ‘business’ for UK VAT purposes.