VBNB20600 - VAT Business and non-business basic principles: section 94 of the VAT Act 1994
Section 94 is not intended to be an exhaustive description of what may or may not be considered to be a business activity. It is of limited assistance when you are considering a complex case and this is why the business test (VBNB30200) needs to be applied when deciding whether an activity is business or not.
Membership subscriptions
Subject to the business test set out in VBNB30200, section 94(2)(a) explains that where a social club or a sport club provides a range of services to its members for an annual membership subscription fees, this is a business activity.(VBNB60100)
Admission to premises
Allowing people entry to premises for a consideration is a business activity if there is a direct link between the payment and admission to a premises, and also in doing this there is an intention to obtain income on a continuing basis.
Office holders
Section 94(4) brings within the scope of VAT the activities of an office holder who accepts an office based on their professional qualification.
For example, a solicitor that holds a directorship in a charity with a role which involves the provision of legal advice to the Charity will be in business if they receive a fee for the role. This is because their role in the Charity is to provide their experience and profession.
However, a solicitor who holds a directorship in a charity purely on the grounds of their standing in the community as opposed to his professional expertise will not fall within the provisions of section 94(4).
Termination or intended termination of a business
Section 94(5) makes clear that anything done in connection with the termination or intended termination of a business is treated as being done in the course or furtherance of that business.
Disposal of a business as a going concern
The disposal of a business and the assets as a transfer of a going concern (TOGC) is treated as a business activity under section 94(6) even though the supply is disregarded for VAT purposes. VTOGC2050 provides further information on TOGC.
Disposal of the assets or liabilities of a business
The disposal of the assets or liabilities of a business for a consideration is a business activity under section 94(6) of the Act. Even where the assets are disposed of without consideration, then paragraph 5(1) of Schedule 4, VAT Act treats those as a supply of goods made in the course or furtherance of a business .
The application of business assets to private use
Although not covered in section 94, where the use of goods are for a private purpose:
- whether or not for a consideration; and
- which stay part of the assets of a business
it is treated as a supply of services under paragraph 5(4) of Schedule 4, VAT Act 1994.
For more information on application of business assets for non–business activities, please refer to VATSC03310.