»Ê¹ÚÌåÓýapp

If a charity that is engaged in non-business activities deals in shares and other securities as part of the management of its charitable non-business funds, this is also a non-business activity. »Ê¹ÚÌåÓýapp tax incurred on the costs relates to share dealing etc. and cannot be reclaimed as input tax.

»Ê¹ÚÌåÓýapp status of share dealing by charities was confirmed by a tribunal involving the National Society for the Prevention of Cruelty to Children (NSPCC) (LON/92/602X). In this tribunal the Chairman reiterated that there were two key points to consider:

• Was the activity carried out on a sufficient scale and for a sufficient length of time to qualify as a business?
• Was the charity predominantly concerned with those supplies?

»Ê¹ÚÌåÓýapp Tribunal concluded in this case that the share dealings transacted by the NSPCC passed the first test, but not the second. »Ê¹ÚÌåÓýapp investment activities of the NSPCC were in support of its predominant charitable activities. In order to qualify as a business activity the activities would have to go beyond the activities of an ordinary investor managing its assets. This was not the case and would be unlikely to be the case so far as a charity was concerned.

Current policy therefore is that the acquisition or disposal of shares or of any other form of security by a charity is a non-business activity.

Since the NSPCC case there has been a further case concerning the Wellcome Trust.

»Ê¹ÚÌåÓýapp case concerned the sale, by public flotation, of the Trusts subsidiary Wellcome plc. Significant costs (including VAT) were incurred in the course of this flotation. Wellcome argued therefore that the share sale constituted a business activity in its own right. Many of Wellcome plc’s shares were sold outside the EU and would have been zero-rated.

»Ê¹ÚÌåÓýapp VAT tribunal referred the case to the European Court of Justice for guidance on EU law. »Ê¹ÚÌåÓýapp European Court ruled that

“the concept of economic activities�.,is to be interpreted as not including an activity, such as that at issue�, consisting in the purchase and sale of shares and other securities by a trustee in the course of the management of the assets of a charitable trust.�

»Ê¹ÚÌåÓýapp tribunal subsequently confirmed that the sale of shares by Wellcome were not a business activity.