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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: purchase or sale of shares or securities for investment purposes

In the case of Wellcome Trust Ltd (VBNB72900) the European Court of Justice considered the purchase and sale of shares, and other securities, by a trustee that was managing the assets of a charitable trust.

The Court found that this was not an economic activity within the meaning of Article 4(2) of the Sixth Directive. As a result tax paid on the cost of such disposals could not be claimed as input tax.

This ruling potentially has widespread application. It could be seen to apply to all businesses, pension funds and other organisations that carry on such activities wholly for investment purposes.

However HMRC does not wish to draw such a wide interpretation. Instead we only apply the ruling when a business:

  • disposes of its own shares; and
  • uses the income gained for non-business purposes.