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VAT Land and Property

Business and non-business: do all property activities constitute a business?

You will find the criteria for distinguishing between business and non-business activities in VBNB. This guidance includes comprehensive advice on identifying a business activity and should be read in conjunction with this section.

Two Tribunal cases which highlight property activities that do not qualify as business are The Royal Exchange Theatre Trust (QB[1979] STC 728) and Whitehall Chase Foundation Trust (VTD 5134):

The Royal Exchange Theatre Trust solicited donations from the public to restore a building for use as a theatre. Its lease was then assigned, free of charge, to another company. The Trust’s activities, as a whole, were not business because of:

  • the complete absence of consideration from the second company;
  • the lack of any commercial element in the activity; and
  • the small number of taxable supplies made in the course of soliciting donations.

The fact that the Trustees carried on their activities with great skill and in a business-like manner was held to be irrelevant.

Whitehill Chase Foundation Trust, a registered charity, appealed against the decision of the Commissioners refusing to register them for VAT. The charity owned two buildings and rented these to another charity, the Acorn Christian Healing Trust (ACHT), on a repairing lease for a peppercorn rent of £1 per year. From 1 August 1989, they wished to opt to tax “this continuous supply of services”. In addition the Trust provided ACHT with donations.

The Commissioners refused registration on the grounds that they were not satisfied that the Trust was carrying on a business or that the supplies indicated would be in the course of business. The Tribunal dismissed the appeal.

Common factors present in these cases include:

  • absence of consideration - this is especially apparent in charity/voluntary groups funded largely by donations;
  • lack of commercial activity - again present in the groups described above;
  • insignificant taxable supplies - where these are small or negligible in relation to the land or property involved.