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HMRC internal manual

VAT Government and Public Bodies

Bodies governed by public law: definition: introduction

Many activities of public bodies are outside the scope of VAT either because they are funded from taxation for the wider public good, or because they are regulatory in nature and do not involve the making of supplies of goods or services. For example in the case of Hutchinson 3g (C-369/04) the Court of Justice of the European Union held that the issue of Wireless Telegraphy Licences by the State was not an economic activity. It was therefore outside the scope of VAT, notwithstanding the fact that the licences were auctioned.

Other activities of bodies governed by public law can also be outside the scope of VAT, even though they would be within the scope of the tax if carried on by non-public bodies. Under Article 13(1) (see VATGPB2100), ‘states, regional and local government authorities and other bodies governed by public law’ are not regarded as taxable persons when they engage in activities as public authorities. Case law has confirmed that:

  • the bodies in question are those which form a part of the public administration, and
  • they engage as public authorities when they undertake their duties under a ‘special legal regime’ which applies to them and not to other bodies.

Article 13(1) is subject to certain mandatory exclusions and the requirement that the outcome must not lead to significant distortions of competition with non-public bodies. The provision therefore only applies to the types of body specified and only in the circumstances when they engage as public authorities.

In any other circumstance the activities of bodies governed by public law will be within the scope of VAT and subject to the normal rules.