HMRC keep taking cases on non-economic activity, looking to disallow large amounts of VAT on the grounds it is attributable to (used by) the non-economic activity even when it is clear, as here, that the non-economic activity (free services in this case) is done for a business purpose and to stimulate the generation of taxable income. This line of argument goes all the way back to the Imperial War Museum case (free admission for some people on some days) and of course more recently we have seen cases like Sveda, Ibedrola, ANL, Will Woodlands, Durham Cathedral etc.
Source KPMG
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