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
- goods and service are provided but for no charge;
- payment is made, but no goods or services are provided, for instance a parking fine or
- because goods and services are provided but there is no link between the supply and the payment received (see VATSC05100);
- 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.