For a transaction to be subject to VAT, it must normally meet both of the following conditions:
- It must be a supply of goods or services
- The supply of goods or services must be ‘in the course or furtherance of a business activity’
A supply is an exchange transaction in which goods or services are provided in return for consideration. A transaction is not a supply if:
- A payment is made but nothing is provided in return. For example, a donation is a payment but without any goods or services provided in return
- There is no consideration. For example, goods or services are provided free of charge
- Goods or services are provided but any consideration is voluntary. For example, a street musician solicits donations from passers-by.
