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HMRC internal manual

VAT Business/Non-Business Manual

Legal history: cases about the purchase or sale of shares for investment purposes


Please note that the following material is not a full summary of the case - it merely highlights the principle referred to in the appropriate section of this manual.

Wellcome Trust Ltd 1996 STC 945

The Wellcome Trust Ltd was the sole trustee of a charitable trust. It sold a great many shares that it had held for several years and reclaimed input tax on expenses incurred in relation to the sale of shares to people resident outside the EU. HMRC rejected the claim on the basis that the company’s investment activities did not constitute a business.

The European Court held that the exercise of the right of ownership could not by itself be regarded as an economic activity. Neither the scale of a sale of shares, nor the taking of consultant’s advice on the sale, could be used to tell the difference between the activities of a private investor, which would be outside the scope of VAT, and those of a large investor.

Whether or not the sale of shares was the predominant concern of the activity in the course of which the sales took place could not affect how an investment activity was classified. Therefore, the Court held that the concept of economic activities did not include an activity consisting in the purchase and sale of shares and other securities by a trustee in the course of the management of a charitable trust.