VATGPB3220 - Non-business activities: whether provided as a public authority: special legal regime

Northumbria Healthcare NHS Foundation Trust

In Northumbria Healthcare NHS Foundation Trust v R & C Commrs [2025] UKSC 37, the Supreme Court considered when an activity will fall under a special legal regime. The findings considered the cases discussed in the previous page, and provide a helpful explanation of when a public authority can be seen as ‘acting in that capacity’ i.e. carrying out activity under a special legal regime.

In its findings, the Court determined that for an activity to fall under a special legal regime:

  • There must be a legal obligation in national law that governs or materially effects how the activity is carried out; and
  • The law in question must have legal certainty.

A legal obligation in national law that governs or materially effects how the activity is carried out.

It is not sufficient that a body operates within the wider framework of legal obligations imposed upon it under primary or secondary legislation, or that the body is acting in line with its public law responsibilities when carrying on the activity.

The key question to answer is whether the legal rules governing the activity have a material effect on how it is performed, so that the activity is legally constrained in a way that is distinct from how a private operator would carry it on.

If the activity is governed by ordinary legal conditions that apply to private traders, there will not be a special legal regime in respect of the activity.

In practice, there are two broad scenarios in which a special legal regime will exist in respect of an activity:

  1. Where a public authority is compelled to undertake an activity and legal obligations are in place which materially affect how the activity is performed that do not apply to private providers
  2. Where a public authority may undertake an activity, and where is does undertake that activity, legal obligations materially affect how the activity is performed that do not apply to private providers.

Legal obligations that materially affect how an activity is performed will often derive from secondary legislation, although this is not always the case. Further detail on this point can be found in the section immediately below.

It is the responsibility of the public body to identify and consider the legislation governing their activities. When deciding whether an activity is carried on under a special legal regime, it is important to identify and consider the precise legislative provisions under which the activity is carried out.

The law in question must have legal certainty

Primary, secondary and tertiary legislation are capable of imposing legal obligations with the necessary legal certainty and have the potential to govern or materially affect the activity.

Guidance, whether internal or imposed by an external body, will not create a legal obligation capable of satisfying this test, unless that ‘guidance’ amounts to tertiary law.