»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp purpose of an activity must not be confused with the ultimate purpose (historically described as the ‘predominant concernâ€�) of the person carrying on the activity.

»Ê¹ÚÌåÓýapp activity itself must be objectively considered to determine whether it is business activity. »Ê¹ÚÌåÓýapp fact that it is carried out by an organisation whose overall aims are non-economic (e.g. a charity or a public body) does not change that.

Some organisations have taken the view that they were not in business because they do not have a profit motive. However, that is not determinative of whether an activity is business or not.

Whether the purpose of the activity is to generate income is a relevant factor. »Ê¹ÚÌåÓýapp purpose for which the expenses were incurred is also relevant to the question of whether the VAT incurred on purchases can be recovered.

For a taxable person to be entitled to recover the VAT incurred on costs, those costs must have been incurred for its taxable business activities. Guidance, VIT10200 provides further information.

»Ê¹ÚÌåÓýapp question of whether activities are business or non-business is also relevant to whether a person is eligible for certain reliefs. »Ê¹ÚÌåÓýappse reliefs are available for costs which relate solely to charitable or non-business purposes. For example, a charity organisation may incur VAT costs on the construction of a building to be used for their charitable activities. However, the fact that the activity is charitable does not mean that the activity is non-business and therefore that they are entitled to zero rating of the services received. First, the charitable activities must be examined to determine whether they are business or non-business. Unless the services are only used for the non-business activities, they would not be eligible for zero rating. Where the building is to be used both for business and non-business, the VAT costs on the construction services will not qualify for the zero rate of VAT. [Longridge on Thames]