VAT Basics
What types of entities can be a ‘taxable person’?
The definition of a taxable person in the VAT Directive is any person or body “who, independently, carries out in any place any economic activity, whatever the purpose or results”. Economic activity in the UK broadly means any business activity. I consider this definition below.
So, what is a person or body?
In practice, a taxable person or body is generally a business, sole trader or professional. Examples of types of legal entities are a:
- Sole proprietor
- Partnership
- Limited Liability Partnership (LLP)
- Limited company (limited by shares)
- Private company (limited by guarantee)
- Public Limited Company (PLC) – a company registered under the Companies Act (1980)
- Community Interest Company (CIC)
- Charitable Incorporated Organisation (CIO)
- Private unlimited company
- Club or Association
- Unincorporated Association
- Co-operative Society (Co-Op)
- Community Benefit Society (BenCom)
- Trust
- Charity
- Not For Profit (NPF) entity
- Right To Manage company (RTM)
- Financial Mutual
- Societas Europaea (SE)
- Co-operative or community benefit society
- “Section 33” body, eg; Local Authorities, Fire and Rescue Authorities, Police, Lighthouses, the BBC etc – VAT Act 1995 s33. These bodies have different VAT rules, and they may not necessarily be a taxable person
Each type of entity or structure is subject to separate rules; from; governance, direct tax, reporting, accounting, risks, costs, benefits, responsibilities to legal rights and obligations etc. However, from a VAT perspective, the VAT legislation applies equally to all taxable persons.
Two or more corporate bodies may apply to register as a single taxable person (VAT group) if they can meet certain conditions.
A corporate body can apply to register each division separately if it:
- is organised in divisions
- carries on its business in divisions
- can meet certain conditions
What are not taxable persons?
Private individuals are not generally involved in business and will therefore not be classed as taxable persons.
What is business?
There is considerable case law on what constitutes ‘business’ for VAT purposes. I have written about this issue many times, as it is a fundamental issue in the tax.
The following articles consider such case law:
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
Registration
A guide to VAT registration here.