V6.306 Business/non-business supplies

Part V6 Business by business

V6.306 Business/non-business supplies

V6.306 Business/non-business supplies

Directive 2006/112/EC art 13(1) allows local authorities to treat certain activities as “non-business”, provided that both of the following are satisfied:


    •     they engage in the activities as public authorities


    •     non-business treatment would not lead to significant distortion of competition

Case law has confirmed that public bodies engage as public authorities when they undertake their duties under a legal regime which applies to them and not to other bodies (a “special legal regime”). HMRC's interpretation of the terms “bodies governed by public law” and “special legal regime”, which is set out in Revenue and Customs Brief 27/08 (RCB/27/08, Division V16.3), is based on the decisions in Edinburgh Telford College [2006] STC 1291 (CS) and Riverside Housing Association [2006] STC 2072 (Ch). In HMRC's view the policy informed by these decisions has been confirmed by the subsequent outcomes of The Chancellors, Masters and Scholars of the University of Cambridge VTD 20610 and Wakefield College [2011] UKUT 495 (TCC).

To qualify under the first test, there must be legislation that obliges or permits a local authority to undertake the activity and which governs the performance of that activity. Activities that can be undertaken by private traders under the same legal conditions as those governing the local authority activity fail the test and are treated as business activities. In addition there is a list

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