The VAT concept of business
The VAT system is policed by HMRC and there can be heavy penalties for breaches of the legislation.
There are four conditions that must be satisfied in order for an activity to be within the scope of UK VAT.
These conditions are that the activity:
- is a supply of goods or services
- that the supply takes place in the UK
- is made by a taxable person
- is made in the course or furtherance of any business carried on or to be carried on by that person
The fourth point above is a condition that needs to be considered when deciding whether an activity is within the scope of VAT. This concept of business is one of the less well-known rules. However, it is an important condition that decides if a business must charge VAT on their sales, known as output VAT and on its ability to recover VAT, known as input tax.
The VAT concept of business is taken to be the same as the concept of 'economic activity' set out in European legislation. Therefore, if an activity falls within EU definition of economic activity it must be business in the UK. Both of these definitions are wide and, in some cases, have needed to be interpreted by the courts.
Newsletter
With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!
Latest news
- Tax Diary May/June 2024
18/04/2024 - More...
1 May 2024 - Due date for corporation tax due for the year ended 30 July 2023. 19 May 2024 - PAYE and NIC deductions
- Payrolling employee expenses and benefits
18/04/2024 - More...
Employers can register on a voluntary basis (before the start of the tax year) to report and account for tax on certain
- Changes to Scottish Income Tax rates 2024-25
18/04/2024 - More...
A reminder of the changes to Scottish Income Tax rates for the 2024-25 tax year. It was announced as part of the