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HMRC internal manual

VAT Government and Public Bodies

From
HM Revenue & Customs
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Non-business activities: distortions of competition: relevance

The question of competition will only be an issue in cases where:

  • an activity is carried out by a public body under a special legal regime
  • a supply is made to a third party for a consideration, and
  • the supply is in competition, either actually or potentially, with private sector suppliers of similar goods or services.

See VATGPB3220 for further information about whether an activity is carried out under a special legal regime. If it is not, it is unnecessary to consider the position any further.

If, and only if, an activity is carried out under a statutory obligation for a consideration, is it necessary to consider whether it is in competition with other suppliers of similar goods and services. But even where a charge is made many activities, such as welfare services (see VATGPB8100), are treated as non-business. This is because although the law requires the public body to carry out the activity, it also allows a charge to me made to beneficiaries as a contribution towards the costs of providing the service.