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HMRC internal manual

VAT Business/Non-Business Manual

VAT Business and Non-Business activities: taxable persons with more than one activity

A taxable person is a VAT registered trader or someone who is required to be registered.

A taxable person has to charge VAT. They may recover input tax on all supplies they make by way of a business activity. This recovery may be subject to restriction if the taxable person makes exempt supplies.

A taxable person may undertake more than one activity. Some of these may be business for VAT purposes and some non-business. The business test (VBNB22000) should be applied to all of a taxable person’s activities.

An example of a private or personal non-business activity might involve a builder whose hobby is trading in old stamps and postcards. They make “supplies” by doing this. However, providing the hobby is seen as a non-business activity when the business tests are applied these supplies will not fall within the scope of the tax.

An example of a non-private non-business activity might involve an organisation providing free advice to members. In the absence of any taxable supplies this is a non-business activity for VAT purposes. It is a non-private activity because it is an activity which forms part of the organisation’s overall objectives.

You need to apply the business test to each activity to decide whether it is within the scope of the tax.

Tax paid on goods and services used for both business and non-business activities may need to be apportioned. VIT VAT Input Tax VIT25000 provides guidance on how to make an apportionment. VIT VAT Input Tax VIT25510 sets out an alternative treatment where full recovery of the VAT incurred can be obtained upfront with payment of an output tax charge to take account of private use.

In Rainheath Ltd (VBNB72600) the tribunal found that there was a mixture of business and non-business activities. The case shows that a limited company is not necessarily in business for all of its activities.

In Leeds Kashrut Commission and Beth Din Administrative Committee (VBNB72600) the tribunal found that a single legal entity had two separately identifiable business activities.

In Walker (DA) (VBNB72600) the tribunal found that there were two business activities; one taxable, the other exempt.

In Williamson (RW & AAW) (VBNB72600) the tribunal found that there were two business activities, both of which were taxable. It showed that being registered under a trading name did not keep other business activities carried on by the same legal entity from being part of the overall business activities to be accounted for under the VAT registration.