VAT - Cost Share Exemption - The new Combined Manual and VAT Notice


The exemption applies when 2 or more organisations with exempt or non-business activities join together to buy services on a cooperative basis, and in doing so, form a separate entity, a cost sharing group or CSG, to supply themselves with qualifying services at cost.


HMRC has recently revised the VAT manual on the cost share exemption.


In Revenue and Customs Brief 3 (2018) HMRC announced it was making 3 changes to the scope of the cost share exemption (CSE):


(a) From 22 March 2018, the CSE is restricted to exempt activities in the following Exemption Groups in Schedule 9 of the VAT Act 1994:

  • postal service (Group 3)

  • education (Group 6)

  • health and welfare (Group 7)

  • subscriptions to trade unions and professional bodies (Group 9)

  • sport (Group 10)

  • fundraising by charities (Group 12)

  • cultural services (Group 13)

Housing associations can continue to apply the CSE for the time being until HMRC gives more guidance.


(b) The CSE is restricted to members located in the UK. This means it no longer applies to transactions with members located in other EU member states.


(c) A CSE is no longer permitted where an uplift has been charged on transactions solely for transfer pricing purposes.


For more information on the implementation of these changes, you may read Revenue and Customs Brief 3 (2018): changes to the VAT exemption for cost sharing groups and Impact on existing cost share groups following changes to HMRC’s policy (VAT information sheet 02/18).


Hammad can assists with challenging VAT assessments through the internal HMRC appeal process or by appealing at the Tax Tribunal or through ADR.