Commentary

V6.184 Liability of supplies and activities of charities

Part V6 Business by business

V6.184 Liability of supplies and activities of charities

Charities

V6.184 Liability of supplies and activities of charities

Introduction

This section and V6.185 examine important VAT considerations likely to be of relevance to the charity sector. This section looks at the liability of supplies and activities of the charity sector. Included within this discussion are issues such as whether a charity is acting in the course or furtherance of business, whether its income is consideration for a supply and what reliefs are available for charities' business income. V6.185 looks at VAT recovery and other practical points for charities. As part of this, it examines reliefs that may apply to some of the goods and services which are purchased by charities.

Business/non-business, donations and grants for charities

Business/non-business

Deciding whether a charity's activities are undertaken 'in the course or furtherance of business' is often both a very important and very difficult exercise. The result of that exercise may impact on whether a charity can or must register for VAT, whether it has to charge VAT on its income and whether it can recover VAT on its costs. It can also impact on the charity's eligibility for VAT relief on purchases.

The concept of 'business' and the related european concept of 'economic activity' are complex and much litigated – they are addressed in Division V2.2.

In the context of charities, of particular importance is whether the profit motive (or the absence thereof) has any bearing when determining whether activities are business or non-business. The profit motive is addressed at V2.203 which includes discussion

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