HMRC consultation on implementation of EU VAT cost-sharing exemption |
9th September 2011
This will be of major importance to exempt or partially exempt business such as insurers as well as charities and similar organisations. At the moment, companies and organisations have to charge VAT on “back office” services such as HR and IT which they share with other parties. If the other party as the recipient of services is exempt or partially exempt from VAT, they can’t recover the VAT either at all or in full meaning it has to be accounted for as a cost – which doesn’t make cost sharing attractive to exempt businesses. Should the exemption be implemented, companies with VAT exempt and/or non-business supplies can set up a “cost sharing group” (CSG) with other businesses so that they are allowed to pass on a share of costs incurred by more than one party without having to charge VAT, similar to a “VAT group”. However, it is expected that HMRC might limit the eligibility to enter a CSG to companies that can only recover up to 15% of the VAT on their costs. A formal consultation led by HMRC and HM Treasury with all sectors is to be launched in early October. |
