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HMRC internal manual

VAT Business/Non-Business Manual

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HM Revenue & Customs
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VAT Business and Non-Business activities: using the business test

In most cases it will be clear whether an activity is “business” and should fall within the scope of VAT. For example, a sole proprietor builder who earns his living from his trade is clearly in business.

However, it can be harder to work out whether people who have less common activities, motivations or scales of supply are in business or not.

The business test that came from the case of Lord Fisher (VBNB72050) helps us in such cases. It consists of six questions or indicators. These ask us to look at an activity to see if those features that the courts have in the past seen as being characteristic of a “business” are present.

The questions do not form a checklist. A business may have some but not all of the features indicated. Instead they should be seen as a set of tools designed to help compare an activity you are uncertain about with features of activities that are clearly business.

It is quite possible that someone may undertake a number of activities some of which are business and some non-business. It is therefore important to apply the business test to individual activities separately. It does not follow that all the supplies made by a taxable person will be the course or furtherance of their business.

For example, imagine a person registered as a self employed plumber who now and again renovates old cars. They do not automatically have to charge tax when selling those cars. This is because it would be hard to see the activity of car renovation being included within their business as a plumber.

On the other hand, if the car activity can be seen to have the attributes of a business in its own right then the plumber would have to charge tax on the sales.

However, if the plumber was found to have lectured a DIY evening class HMRC would probably see this lecturing as being part of their main business. This is because it is connected so closely with plumbing.

Guidance on registration questions such as whether an activity can be separately registered can be found in VATREG01000.