Cost sharing group
An exemption from Value-Added Tax (VAT) applies, in certain circumstances, to the supply of services by a cost sharing group.
A cost sharing group is an independent entity:
- established for administrative convenience
- and
- for the purpose of rendering to its members the services directly necessary to enable them to carry on that activity.
The group must only recover from its members the exact amount of each member’s share of the joint expenses.
The exemption applies to groups whose members:
- carry on VAT exempt activities in the public interest
- or
- carry out additional taxable activities, if those activities are directly necessary for their VAT exempt, or non-taxable, activities.
The exemption does not apply to groups whose members carry on exempt activities that are not in the public interest. An example of such is financial services.
The exemption is designed to help businesses to collaborate and to share resources without being deterred by the cost of VAT on any recharges.
Further guidance contains more detailed information on the scope of the exemption.