Tag Archives: VAT-non-business-input-tax

VAT Business/Non-Business HMRC Internal Manual updated

By   14 October 2024

HMRC internal guidance manual has been updated on 9 October 2024.

This is likely to affect; charities and similar bodies, NFP, clubs, associations, philanthropic organisations, galleries and museums, “hobby” activities, amongst other persons.

Business or Non-Business (N-B) is very important in VAT as it determines, inter alia, whether a supplier is

  • liable to register
  • liable to account for output tax
  • able to recover (all, some, or no) input tax

The definition of business and N-B here.

Legislation: The I Act 1994 Section 24(5).

Further reading

 I have written about this issue many times, as it is a fundamental issue in the tax.

The following articles consider case law and other relevant business/N-B issues:

Wakefield College

Longbridge

Babylon Farm

A Shoot

Y4 Express

Lajvér Meliorációs Nonprofit Kft. And Lajvér Csapadékvízrendezési Nonprofit Kft

Healthwatch Hampshire CIC 

Pertempts Limited

Northumbria Healthcare

What the Guidance Manual covers:

  • an overview of the meaning of business for VAT purposes
  • general principles
  • meaning of N-B
    • the term ‘business activity’ (economic activity)
    • the concept of ‘business’ for VAT purposes
    • the meaning of business
    • the purpose of activity
    • N-B activities
    • persons with both business and N-B activities
    • outside the scope income
    • N-B activities which result in payment
  • determination procedures to establish whether an activity is business N-B
  • the relevant UK law and caselaw (per above amongst other cases)
  • the general approach for inspectors on business/N-B
  • factors to consider when determining if an activity is business or not
  • the link between supplies and consideration
  • methods of apportionment of input tax and approval of apportionment methods
  • formal procedures and work systems
  • clubs and associations
  • specific issues
  • legal history
  • HMRC policy background

This is the main reference material for HMRC inspectors and other employees, so it is very helpful for advisers to understand HMRC’s likely approach to a potential VAT issue.