VATGPB8770 - Other local authority activities: miscellaneous (F to M): markets

Rent from stalls and pitches

The letting out of market pitches, including pitches in off street markets, shop units and the like, is normally a business activity. In most cases, the main or overarching supply is a license to occupy land. In such cases, the supply is exempt from VAT unless the supplier has opted to tax. However, each case must be considered on its facts to determine whether the right of occupation is the predominant supply, or whether other elements are included that could make it a standard-rated supply. Further guidance on this can be found in VAT Notice 742: Land and property.

There is an exception to this general rule for three London wholesale markets, where the local authority operates under a special legal regime in the capacity of a public authority. It has been accepted that the local authority does not engage in a business activity in relation to the renting out of pitches in these markets.

Street trading

In the case of street trading it is normally a requirement that the trader obtains a licence from the local authority in order to trade lawfully (there are some exemptions from this requirement – mainly for peddlers and news vendors). The granting of such a licence by the local authority is a statutory function which is outside the scope of VAT. This will often be the case for traders operating from on-street markets, but it is important to be certain of the terms under which the trader is trading. Is the trader paying a licence fee, or paying a market pitch or stall rent? This may require a more exhaustive analysis beyond the description on invoices.

Licensing other markets

Local authorities are responsible for issuing licenses to regulate other market operators within their local jurisdiction. These licences ensure that markets are operated within agreed guidelines. They can cover things such as the type and number of pitches, operating hours, market days. Only local authorities can issue market licenses so this is a non-business activity and falls outside of the scope of VAT.

Charter markets

Some local authorities operate markets established under Royal Charter often dating back to the Middle Ages. These charters often forbid any other person holding a similar market within the confines of a particular town or within a certain distance, often six and two thirds miles.

It is sometimes claimed that they are acting under a special legal regime. However, close examination of these Charters and private Acts of Parliament applying to the predecessor bodies of the local authorities, often reveals that the Charter is of no more than of historic interest.

In particular many local authorities from the mid-nineteenth century onwards took the opportunity to incorporate their market operations in statute. These statutes, invariably private Acts made at the specific request of the local authority concerned, often include reference to the Markets and Fairs Clauses Act 1847 and adopt many of the powers set out by that Act.

Significantly the role of the Act is to consolidate the legislation which applies to markets and fairs created under Local Acts Its main purpose being to create uniformity and simplify procedures. For example, the 1847 Act grants the operators of markets the right to set byelaws, places certain legal requirements upon them about the provision of weights and measures and requires them to clearly display their fees. As the Act applies equally to both the private sector and local authorities, it does not constitute a special legal regime. The provision of a market by a local authority is therefore a business activity.