VAT—when is a person in business?
Produced in partnership with Michael Ridsdale of Wedlake Bell LLP
VAT—when is a person in business?

The following Tax practice note produced in partnership with Michael Ridsdale of Wedlake Bell LLP provides comprehensive and up to date legal information covering:

  • VAT—when is a person in business?
  • Meaning of business—the legislative tests
  • European legislation
  • UK legislation
  • Meaning of business—case law
  • What activities are non-business activities?

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

The term ‘business’ is a concept which underpins the operation of VAT because:

  1. a person is only liable or entitled to register for VAT (ie is a taxable person) if it makes taxable supplies in the course or furtherance of a business

  2. VAT can only be charged by a person where that person is in business and is registered for VAT and whether a person is liable to register for VAT depends on whether he is a taxable person and therefore in business, and

  3. a person is only entitled to recover VAT where it has incurred such VAT for the purposes of its taxable business

It is therefore very important to establish whether or not a person is in business for VAT purposes. Although in many cases it is obvious when a person is in business, this is not always the case.


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