NABMA has been made aware that on 27 July 2020, HMRC updated the guidance in its VAT Government and Public Bodies manual on the VAT treatment of local authority lettings of market stalls and pitches.
The guidance previously opined that lettings of market stalls and pitches were, normally, exempt. However, in a change to this, the guidance now states that the letting of market pitches (including pitches in off-street markets) and shop units is, normally, a business activity. Therefore, in most cases, it is subject to VAT at the standard rate unless the supply has the characteristics of a licence to occupy land and this is the main (or overarching) supply being made (in which case, it is exempt, subject to an option to tax). The guidance notes a specific exception to this for three London wholesale markets, in which case, it has been accepted that the local authority (acting in the capacity of a public authority) does not engage in a business activity in this context.
In addition, the updated guidance states that the granting of a street trading licence by a local authority is a statutory function, which is outside the scope of VAT. Although this will often apply to traders operating from on-street markets, this will depend on the terms under which the trader is trading and whether the trader is, for example, paying a licence fee, or pitch or stall rent.