VATLP03200 - Business and non-business: do all property activities constitute a business?

You will find the criteria for distinguishing between business and non-business activities in VBNB. This guidance includes comprehensive advice on identifying a business activity and should be read in conjunction with this section.

Two Tribunal cases which highlight property activities that do not qualify as business are »Ê¹ÚÌåÓýapp Royal Exchange »Ê¹ÚÌåÓýappatre Trust (QB[1979] STC 728) and Whitehall Chase Foundation Trust (VTD 5134):

»Ê¹ÚÌåÓýapp Royal Exchange »Ê¹ÚÌåÓýappatre Trust solicited donations from the public to restore a building for use as a theatre. Its lease was then assigned, free of charge, to another company. »Ê¹ÚÌåÓýapp Trust’s activities, as a whole, were not business because of:

  • the complete absence of consideration from the second company;
  • the lack of any commercial element in the activity; and
  • the small number of taxable supplies made in the course of soliciting donations.

»Ê¹ÚÌåÓýapp fact that the Trustees carried on their activities with great skill and in a business-like manner was held to be irrelevant.

Whitehill Chase Foundation Trust, a registered charity, appealed against the decision of the Commissioners refusing to register them for VAT. »Ê¹ÚÌåÓýapp charity owned two buildings and rented these to another charity, the Acorn Christian Healing Trust (ACHT), on a repairing lease for a peppercorn rent of £1 per year. From 1 August 1989, they wished to opt to tax “this continuous supply of servicesâ€�. In addition the Trust provided ACHT with donations.

»Ê¹ÚÌåÓýapp Commissioners refused registration on the grounds that they were not satisfied that the Trust was carrying on a business or that the supplies indicated would be in the course of business. »Ê¹ÚÌåÓýapp Tribunal dismissed the appeal.

Common factors present in these cases include:

  • absence of consideration - this is especially apparent in charity/voluntary groups funded largely by donations;
  • lack of commercial activity - again present in the groups described above;
  • insignificant taxable supplies - where these are small or negligible in relation to the land or property involved.