VBNB20700 - VAT Business and non-business activities basic principles: Non-business activities

Non-business activity is not defined in law just as there is no comprehensive definition of business activity. However, it is important to identify non-business activities because the VAT incurred on such activities is non-deductible.

A non-business activity is likely to arise where:

(1) the activity does not fall within the provisions of section 94 of the VAT Act 1994.

(2) goods or services are not provided for consideration. This could be because

  1. goods and service are provided but for no charge;
  2. payment is made, but no goods or services are provided, for instance a parking fine or
  3. because goods and services are provided but there is no link between the supply and the payment received (see VATSC05100);
  4. Money is freely given as donation.

(3) an activity is performed in a private capacity (e.g. hobbies)

(4) the activity is otherwise outside the scope of VAT, for example many statutory functions undertaken by public bodies.