PART 7Value added tax
198Supply of goods or services by public bodies
1
VATA 1994 is amended as follows.
2
In section 41 (application to the Crown)—
a
omit subsection (2), and
b
in subsection (3)(b) for “a direction under subsection (2) above,” substitute “
section 41A,
”
.
3
After that section insert—
41ASupply of goods or services by public bodies
1
This section applies where goods or services are supplied by a body mentioned in Article 13(1) of the VAT Directive (status of public bodies as taxable persons) in the course of activities or transactions in which it is engaged as a public authority.
2
If the supply is in respect of an activity listed in Annex I to the VAT Directive (activities in respect of which public bodies are to be taxable persons), it is to be treated for the purposes of this Act as a supply in the course or furtherance of a business unless it is on such a small scale as to be negligible.
3
If the supply is not in respect of such an activity, it is to be treated for the purposes of this Act as a supply in the course or furtherance of a business if (and only if) not charging VAT on the supply would lead to a significant distortion of competition.
4
In this section “the VAT Directive” means Council Directive 2006/112/EC on the common system of value added tax.