Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Government and Public Bodies

From
HM Revenue & Customs
Updated
, see all updates

Government departments and health authorities: VAT law: restrictions on non-business treatment

Among the restrictions Article 13 of the Principal VAT Directive (see VATGPB2100) places on non-taxable treatment (see VATGPB9310), is that it should not lead to a significant distortion of competition. UK law applies additional restrictions to supplies made by Government Departments and health authorities.

Under s41(2) of the VAT Act 1994 the Treasury can direct that where:

‘similar goods or services are or might be supplied by taxable persons in the course or furtherance of any business … the supply of those goods or services by that department shall be treated … as a supply in the course or furtherance of any business carried on by it.’

The list of activities treated as business under a Treasury Taxing Direction is published in the London, Edinburgh and Belfast Gazettes. The vast majority of supplies made by Government Departments and health authorities are in fact potentially in competition with the private sector. Consequently the list of those to be treated as business is substantial.