29th June 2011

The Government wants to hear the views of businesses and organisations on plans to make use of the VAT cost sharing exemption.

The exemption, which is a European law, allows businesses and organisations making VAT exempt and/or non business supplies to form groups to achieve cost savings and economies of scale.

Once formed the groups are relieved of a VAT charge on their supplies if all the conditions of the exemption are met.

At the moment charities and similar institutions and organisations, such as universities, face a VAT liability on goods and services that are received in cost sharing arrangements.

The cost sharing exemption would help to remove the VAT burden that currently prevents them from gaining efficiencies by sharing costs with each other.

The aim of the consultation is to examine how the VAT exemption might best be used, and to look at a framework for its possible implementation.

David Gauke, Secretary to the Treasury, said: “We’d like the views of a wide range of businesses and organisations – particularly those in the education and charity sectors – that have VAT exempt or non-business activities and want to set up cost sharing arrangements.

“This is a complex relief which could have far reaching impacts across a wide range of sectors and careful consideration of the consultation results will be required.”

The consultation will run until the end of September.

More details can be found at: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HMCE_PROD1_031398