Guidance on Defining ‘Carrying on a Business’ for Inspection Purposes

Meaning of “Carrying on a Business” for Revenue Scotland Inspections

For Revenue Scotland’s inspection powers, whether someone is “carrying on a business” matters because ordinary inspections usually apply only to business premises, not purely private premises. The term takes its normal everyday meaning and can cover more than just profit-making trade, including property letting, charity activities and the work of public authorities. A separate exception may apply for valuation inspections under section 145 of the Revenue Scotland and Tax Powers Act 2014.

• Revenue Scotland can generally inspect business premises, but not premises used only for private or domestic purposes unless a specific legal exception applies.
• Official guidance says “carrying on a business” has its ordinary everyday meaning rather than a narrow technical definition.
• The guidance expressly includes letting property, charity activities such as shop trading, and activities carried out by public authorities.
• Residential letting can still count as a business for inspection purposes, even if it is argued to be passive investment rather than trading.
• Borderline cases can be harder where activities are occasional, mixed with private use, or not obviously commercial.
• Scottish Ministers can make regulations to define the position more precisely, but the guidance said none had been made at the time.

Scroll down for the full analysis.

What “carrying on a business” means for Revenue Scotland inspection powers

This page explains a narrow but important point in the Revenue Scotland and Tax Powers framework: when an activity counts as “carrying on a business”. That matters because Revenue Scotland’s power to inspect premises generally depends on the premises being business premises. If an activity is not a business, the inspection power may be more limited.

What this rule is about

The source material deals with the meaning of “carrying on a business” for information notices and inspections under the Revenue Scotland and Tax Powers Act 2014.

The phrase is important because inspection powers do not apply to every place connected with a taxpayer. In general, Revenue Scotland can inspect business premises, but not premises that are purely private, unless a specific statutory exception applies. The guidance highlights that one such exception exists for certain valuation inspections under section 145 of the 2014 Act.

So the real question is not an abstract one about what a business is in all areas of law. It is a practical question about whether an activity brings premises within the rules on tax inspections.

What the official source says

The official guidance says that “carrying on a business” takes its normal everyday meaning.

For these purposes, the guidance says the phrase includes:

• letting property, whether as dwellings, to other businesses, or a mixture of both;
• the activities of a charity, such as trading through high street shops; and
• the activities of any public authority, including a local authority.

The guidance also recognises that there can be doubtful cases where it is not clear whether an activity amounts to a business.

It further explains that Scottish Ministers have power to make regulations setting out more precisely what is, or is not, to be treated as carrying on a business for inspection purposes, including by reference to particular activities or persons. The guidance states that no such regulations had been made at the time of publication.

What this means in practice

The practical message is that “business” is not confined to ordinary commercial trading companies.

For inspection purposes, the concept is broad enough to cover activities that some readers might wrongly assume fall outside business tax language. In particular:

• a landlord letting residential or commercial property can be carrying on a business;
• a charity can be treated as carrying on a business when carrying out its activities; and
• a public body is not excluded simply because it is not operating for private profit.

This matters when Revenue Scotland wants to inspect premises connected with a tax position. If the premises are used for an activity that counts as carrying on a business, the inspection regime may apply in the ordinary way. If not, Revenue Scotland may need to rely on some other statutory route, or may be unable to inspect unless a specific exception applies.

The source also makes clear that valuation inspections under section 145 stand apart. Even where premises are not business premises, an inspection may still be possible if it is being carried out for valuation purposes under that provision.

How to analyse it

A sensible way to approach the issue is to ask the following questions.

• What activity is actually being carried on at the premises?
• Does that activity have the character of a business in the ordinary everyday sense?
• Is the case one of the examples expressly mentioned in the guidance, such as property letting, charity activity, or public authority activity?
• Are the premises being used as business premises, rather than only as private or domestic premises?
• Is the proposed inspection an ordinary inspection, or a valuation inspection under section 145?
• Is there any regulation in force that alters the position for inspection purposes? The guidance says none had been made at the time, but that is a point to verify if the timing matters.

In many cases the answer will be straightforward. A shop run by a charity, offices used by a local authority, or premises used in a property letting activity are all likely to fall comfortably within the guidance.

The harder cases are those where the activity is irregular, private in character, or not obviously commercial. In those cases, the fact that the guidance adopts the ordinary everyday meaning means there may not be a sharp statutory test to apply.

Example

A person owns several flats which are let to tenants. Revenue Scotland is considering an inspection connected with a devolved tax matter. The owner argues that residential letting is not a business because it is passive investment rather than trading.

On the official guidance, that argument is unlikely to succeed for inspection purposes. The guidance expressly says that the letting of property, including as dwellings, is included within “carrying on a business”. That means premises used in that activity may be treated as business premises for the inspection regime.

Why this can be difficult in practice

The source gives examples, but it does not lay down a detailed legal test. Saying that the phrase takes its ordinary everyday meaning is helpful up to a point, but it leaves room for judgement at the edges.

Difficulties may arise where:

• an activity is occasional rather than ongoing;
• the premises have mixed private and business use;
• the person carrying on the activity is not seeking profit in the usual sense;
• the activity looks more like private asset management than organised business activity; or
• the inspection is said to be for valuation purposes, which may engage section 145 rather than the ordinary business premises rule.

Another point to keep in mind is that this guidance is about inspection and information powers. The meaning of “business” in this context should not automatically be assumed to be identical to its meaning in every other tax or legal context. The source is directed to the inspection regime under the 2014 Act.

Key takeaways

• For Revenue Scotland inspection purposes, “carrying on a business” takes its ordinary everyday meaning.
• The official guidance says this includes property letting, charity activities, and the activities of public authorities.
• The point matters because ordinary inspection powers generally depend on premises being business premises, subject to specific exceptions such as valuation inspections under section 145.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Defining ‘Carrying on a Business’ for Inspection Purposes

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