VATGPB3100 - Non-business activities: introduction

When considering the statutory activities of public bodies, the first step is to decide whether they are ‘business’ activities.

Many activities carried out by public bodies will be outside the scope of VAT as they will fail the normal ‘business’ test, such as where an activity is carried on for no consideration (see VBNB30200).

However, where there is a supply for a consideration, the activity may still fall outside the scope of VAT as a result of Section 41A of the VAT Act 1994 (see VATGPB2100).

The broad principles here are that:

  1. bodies should form a part of the public administration (see VATGPB2300)
  2. they should engage as public authorities for the activity in question, which means that the activity is governed by legislation which does not apply to non-public bodies
  3. the activity is not listed in Section 41A(2) of the VAT Act 1994 and
  4. the result should not significantly distort competition with non-public bodies

It will invariably be the case that a single public body will be engaged in activities which:

  • are not business activities at all or
  • fall within Section 41A of the VAT Act 1994 or
  • are subject to the normal VAT rules

Subsequent pages in this manual will assist in reaching a decision on how to treat activities of public bodies for VAT purposes.