Pandora owns a business called Ceramics for All. The business makes and sells ceramics

at its premises, which include a shop and a cafe. The shop sells not only ceramics but

also books on ceramics and display stands. Ceramics may be purchased individually or as

part of a "gift package" which includes a book on the history of ceramics and a stand to

display the item.

The business advertises its activities in the local information centre where customers can

obtain a discount coupon against any purchase of a ceramic or gift package. The

business pays a set amount to the centre for each voucher used.

The caf sells hot and cold drinks, cakes and (cold or heated) sausage rolls, which can be

consumed on or off the premises.

Recently the business has opened a ceramics school. Customers attend a course which

contains both practical and informational elements. It also provides specialised courses for

disadvantaged children. Those courses are substantially subsidised both by a local charity

and the business itself.

To provide the courses the business incurred considerable expense for taxable supplies to it,

not only for the additional accommodation but also for consequential alterations to the

shop. It used a professional fund-raiser to obtain the funds for that expenditure.

Discuss the business' liability to VAT

Please help with this practice question