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HMRC internal manual

VAT Government and Public Bodies

HM Revenue & Customs
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Non-business activities: whether provided as a public authority: introduction

It is important to remember that Article 13(1) of the Principal VAT Directive (see VATGPB2100) is concerned with activities which would otherwise fall within the scope of VAT. The first question to consider, therefore, is whether the activity in question does fall within the scope of VAT? If it is publicly funded for the wider common good, or if it is regulatory in nature, then the activity is unlikely to do so.

When considering whether an activity falls within Article 13(1) it is necessary to consider whether the body undertaking it engages as a public authority. If it does not, then the activity can never fall within Article 13(1). It is important to remember here that you should be considering the activity itself.

There is nothing in EU legislation to specify which activities a body engages in as a public authority. Because of the wide range of activities carried out, it would probably be impossible to do so. However, an important decision in the European Court helps to clarify the position.

In Comune di Carpaneto Piancentino (CJEC 231/87) the Court held that the activities engaged in as a public authority are restricted to those that are governed by legislation which does not apply to non-public bodies. This is sometimes referred to as a ‘special legal regime’ (see VATGPB3220). It follows that not every activity of a public body is undertaken as a public authority (and thus falling within Article 13(1)), only those governed by a special legal regime.