VBNB30050 - VAT Business and Non-business: Principles: Policy Background

Historically, HMRC have relied upon the cases of Lord Fisher [1981] STC 238 and Morrison’s Academy Boarding Houses Association [1978] STC 1 in determining whether an activity is business or not. These cases must now be seen in the light of recent case law, in particular Longridge on the Thames COA [2016] BVC33 and Wakefield College, CoA [2018] BVC 22.

Predominant concern – Post Longridge on the Thames

Historically, the UK Courts have been influenced by the overall objectives of the organisation carrying out the activity. This was demonstrated in the cases St Paul’s Community Project Ltd [2005] STC 95 and Yarburgh Children’s Trust [2002] BVC 141 where the decision of the courts was influenced by what they found to be the predominant concern of the organisation.

The Court of Appeal in Longridge on the Thames [2016] BVC33 found that the nature of the organisation carrying out the activity is irrelevant, if objectively viewed the activity is a business activity subject to the conditions listed in VBNB30200. The Court emphasised that the correct test for determining whether an activity is business is one of a direct link between the services or goods supplied and the payment received by the supplier and that the ‘predominant concern’ of the supplier is irrelevant. This means focusing on whether there is a direct link between the services the recipient receives, and the payment made rather than on the wider context of Longridge’s charitable objectives or motive.

It was established in the Wellcome Trust Ltd [1996] STC 945 and Longridge that, where an organisation is involved in a range of activities, it is appropriate to look at each separately and consider whether each amounts to a business activity in its own right. It is the inherent nature of the activity that is to be considered and not whether the activity is predominant or not.