Audrey Fearing outlines HMRC’s new approach to determining business activity for VAT purposes.
HMRC has published a new policy paper and revised guidance explaining how it will now determine whether an activity represents business activity for VAT purposes.
This is an especially important development for not-for-profit organisations as their level of business income affects their liability to register for and charge VAT in respect of those activities, and also their entitlement to charity VAT reliefs and to recover VAT on the costs they incur. The new policy may also impact other taxpayers whose activities HMRC might regard as a hobby or private pastime and therefore ineligible for VAT recovery on related costs.
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