Regulatory licensing and disciplinary functions were not a VAT business, so related fees were outside input tax recovery

Statutory licensing and disciplinary functions carried out to protect the public were regulatory, not trading or commercial, and therefore fell outside the economic circuit for VAT. Although fees were charged and services were supplied in a loose sense, that did not make the activities an economic activity under the Directive or a business in the ordinary sense under domestic law. The related fees were not taxable on that basis, and the institution could not recover or set off input tax.

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Issues: Whether the Institute's licensing and disciplinary activities carried out under statutory powers constituted an economic activity or business for VAT purposes so as to make the related fees taxable and permit recovery or set-off of input tax.

Analysis: The Institute's activities under the relevant statutory schemes were regulatory in character and were undertaken on behalf of the State to protect the public by ensuring that only fit and proper persons were authorised or licensed and by monitoring their conduct. Although fees were charged and the activities involved supplies of services in a loose sense, that was not enough. For VAT under the Directive, the activity had to be economic in nature, and for the domestic Act it had to amount to business in the ordinary sense. The functions in question were not trading or commercial activities and were outside the economic circuit to which VAT applies.

Conclusion: The activities were not taxable economic activity or business for VAT purposes, so the Institute was not entitled on that basis to reclaim input tax.

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