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HMRC internal manual

VAT Government and Public Bodies

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Non-business activities: distortions of competition: key Tribunal decisions

Distortion of competition has been examined on several occasions by the VAT Tribunal. In the City of Westminster (or ‘Bruce House) case (VTD 3367) it considered whether the provision of very basic accommodation for homeless men at Bruce House formed part of the business activities of the local authority.

The Council was able to demonstrate that it had a statutory obligation to provide the accommodation under the National Assistance Act 1948 and was therefore acting in its capacity as a public authority. There was also a specific identifiable charge made for the supply, although this did not cover the full cost of providing it.

Although the Tribunal accepted that the accommodation was similar to that provided in hotels, inns and boarding houses, it concluded that there was in reality no private sector competition for the particular type of accommodation provided at Bruce House. Consequently no distortion of competition arose from the supply being treated as non-business.

In Rhondda Cynon Taff County Borough Council (VTD 16496) the issue was whether the provision of local authority cemeteries was an exempt business supply. It was found that the statutory conditions under which local authorities operate their cemeteries, for example The Local Authorities’ Cemeteries Order 1977 (SI 1977/204), mean that they are provided under a special legal regime.

Furthermore, although there are nearly 3000 cemeteries in the United Kingdom, few are privately operated. Consequently it does not distort competition for local authority cemeteries to be treated as non-business.