Business/Non Business

Question 1

What is the case of Longridge on the Thames?

Answer 1

Provided water based and outdoor activities, charged for these activities based on the end-user’s ability to pay

It argued that a new building was being constructed for a relevant charitable purpose and should be zero rated

The charity claimed its policy of subsidised pricing and volunteer labour showed it was not making supplies for cosndieration.

The COA held that Longridge conducted economic activity and could not obtain zero rating on construction costs. Agreeing with HMRC, the COA held that if there was a direct link between the service and money received by the provider, an economic activity was established.

Question 2

What is the key takeaway from Longridge on the Thames?

Answer 2

It is not necessarily a relevant charitable purpose if the payment does not represent the full cost of the purpose, the supply can still be an economic activity.

Question 3

Describe Wakefield College [2018]?

Answer 3

Gave out places for free, as well as full fees and subsidised places and wanted to clarify a proportion as 95% non-business but it depended on the subsidised places

Court had to decide whether the zero rating of the building was allowed for the provision of education, HMRC argued the fees and subsidised fees were economic activity

Court held that a supply for the purpose of obtaining income is economic activity, it does not have to be a profit

The income was business income and exempt from VAT, so the building could not be zero rated

Question 4

What was the test established in Wakefield?

Answer 4

1. Whether there is a supply for consideration
2. Whether that supply constitutes economic activity

Question 5

What is the case of Colchester Institute Corporation?

Answer 5

Grant income received by Colchester to fund education was third party consideration received by the public purse

it was not outside the scope as HMRC contended

This meant that the institute provided exempt supplies as these were now business activities, the zero rated reliefs to certain charities carrying out non business activities no longer applied

At the time, Lennartz allowed for full recovery on non business activities. The decision meant that input tax recovery was restricted.

Question 6

Describe the case of Brockenhurst

Answer 6

Received exempt educational income and extended exemption to supplies of catering and entertaining services supplied as part of technical training

It ran courses in catering and had a restaurant that sold food at a reduced price. The students got practical experience of working in the restaurant.

The court accepted that the practical training formed an integral part of the curriculum, the basis purpose was not to obtain additional income - the supplies were offered to a limited number of people at 80% of their costs.

They were not in direct competition with commercial providers.

Question 7

Describe the case of Wellcome Trust

Answer 7

The case concerned the sale of of shares, and other securities, by a trustee that was managing the assets of a charitable trust.

It was held not to be an economic activity and input tax could not be recovered.

HMRC apply the ruling when businesses dispose of their own shares and use the income gained for non business purposes