Commentary

V2.236 Business/non-business—investments

Part V2 Registration – deregistration

V2.236 Business/non-business—investments

V2.236 Business/non-business—investments

This paragraph examines the business status of investment activities.

For an overview of VAT and business more broadly, see V2.201B.

Mere investment, ie the acquisition of property, will not in itself constitute an economic activity, even if the holder of the investment can expect to receive income from it. For this well established principle, see the ECJ's judgments in Polysar1, Harnas & Helm CV2 and Wellcome Trust3.

However, if the holder of property exploits it so as to obtain income from it on a continuing basis, they will be regarded as carrying on an economic activity4. Exploitation of property would appear, in this context, to require that the property is in some way made available to a third party for a consideration, see, for example, Van Tiem5 and Rompelman6.

The following dictum of Lord Wilberforce in Simmons7, when modified as suggested by one tribunal chairman, may be helpful as indicating the dividing line between the activities of a trader and the activities of a person who is selling an investment8:

'Trading requires an intention to trade; normally the question to be asked is whether this intention existed at the time of the acquisition of the asset. Was it acquired with the intention of [making taxable supplies to the consumers for a consideration and doing so deliberately and with a certain measure of continuity] or was it acquired as a permanent investment? Often it is necessary to ask further questions: a permanent investment may be sold in order to acquire another investment thought

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