This paragraph provides and overview of 'business' (or, to use the European term, 'economic activity') for VAT purposes. It cross refers to further detailed commentary on the subject.
Significance of business—scope of VAT
VAT is, broadly, levied on supplies of goods and services in the course or furtherance of a business1.
Input tax is, again broadly, VAT charged on the supply to, or acquisition or importation by, a taxable person (in the UK sense), of goods or services used or to be used for the purposes of a business carried on by him2.
A person is liable or entitled to be registered for VAT only if he makes, or intends to make, taxable supplies in the course or furtherance of a business3.
It follows from the above that a supply which is not made in the course or furtherance of a business is not subject to VAT. Similarly, VAT incurred on a purchase, acquisition or importation which is not for business purposes is not recoverable, and non-business activities do not create a liability or entitlement to register. The expression 'business' is therefore fundamental to the operation of VAT.