V3.407 Business or non-business?
In principle, tax chargeable, paid or payable is input tax1 only if the goods or services concerned are used or to be used for the purpose of any business carried on or to be carried on by the person to whom they are supplied or by whom they are acquired or imported2.
Whether a business is carried on or to be carried on
The fact that a person carries on an activity (to use a neutral word) does not necessarily mean that tax is available for credit in respect of the goods or services obtained in order to carry it on. The activity must, in the words of VATA 1994 s 24(1), amount to a “business” which is either “carried on or to be carried on” or, in the words of Directive 2006/112/EC3, the person must be independently carrying out an “economic activity” whatever the purpose or results of that activity.
Whether or not an activity amounts to a business is essentially a matter of fact to be determined in accordance with the circumstances of an individual case. However, the decided cases4 seem to indicate that a person must, at the very least, demonstrate that he is either currently making supplies for a consideration5 on a recurrent basis in the course of carrying on the activity or moving towards a situation in which such supplies will be made. It seems, however, that an activity which does not give rise to the making of supplies for a consideration may
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