HMRC have published Revenue & Customs Brief 10 (2022) 'VAT - business and non-business activities' confirming the updated approach to establishing whether an activity is a business activity or not, following the case of Wakefield College v HMRC [2018] EWCA Civ 952.


Historically, the six tests as set out in Lord Fisher [1981] STC 238 and Morrison's Academy Boarding Houses Association [1978], have been used to assess whether an activity is a business activity and therefore may be a taxable supply for VAT purposes.

The tests covered a range of issues from frequency, size of activity and intent to make a profit.

Current Policy

In 2018, the Court of Appeal ruled on this subject in Wakefield College v HMRC [2018] EWCA Civ 952 and used a two-stage test to assess the nature of the activities in question. This test will now be used by HMRC going forward and the six tests previously used will no longer apply.

This is especially relevant for businesses which are:

The brief states that in determining whether an activity is a business activity, there should be no reliance on an organisation’s overall objective or profit motive.

Two-stage test

The test is as follows:

Stage 1: The activity results in a supply of goods or services for consideration.

Stage 2: The supply is made for the purpose of obtaining income therefrom (remuneration).

Useful guides on this topic

Starting in business: VAT
One of the first decisions to make when starting in business is whether or not you should register for VAT.  Am I running a business for VAT purposes and if yes, when do I register?

Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?

Partly funded courses are a business for VAT
In Wakefield College v HMRC [2018] EWCA Civ 952, the Court of Appeal decided that income from students who are partly subsidised and pay a small additional fee for courses, amounted to a business activity. This meant the construction of a new building could not be zero-rated.

External link

Revenue and Customs Brief 10 (2022); VAT - business and non-business activities

Small acorn
If you like our content come and join us.

Thousands of accountants and advisers and their clients use as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.