HMRC revise guidance on how they determine whether an activity is business or non-business 

23 June 2022      Andrea Marshall, Tax Specialist

Additonal commentary added on 23 June 2023.  Please also see this News article dated 23 August 2022.

On 1 June, HMRC also updated the commentary on business/non business caselaw in VBNB72050 (business test) and VBNB72200 (link between supply and consideration).


On 1 June 2022, HMRC published Policy paper: VAT — business and non-business activities.

It says that this is relevant to:

  • a charity organisation
  • a non-profit making organisation
  • business providing nursery and crèche facilities
  • a business that receives grants or subsidies
  • an organisation or a business carrying out non-business activities

The 6 business tests established in the Lord Fisher and Morrison’s Academy Boarding Houses Association will no longer be applied by HMRC.  Now HMRC are seeking to apply a 2-stage approach, based on those established in the Wakefield College, Court of Appeal case, in order to deermine if an activity is "business" (therefore potentially liable to VAT with associated VAT recovery) or "non-business".  Each activity is to be looked at separately and the two tests are:

Stage 1: The activity results in a supply of goods or services for consideration

Stage 2: The supply is made for the purpose of obtaining income therefrom (remuneration) –  it can be a charge made below cost.

HMRC have revised a number of sections of the VAT Business/Non-Business Manual, including:

If you have any questions please contact Andrea.

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