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Revenue and Customs Brief 10 (2018): VAT - cost share exemption.
HMRC has amended its policy on the cost sharing exemption (CSE) and the impact on the test for directly necessary services. The test enables cost sharing groups to ignore some non-qualifying supplies for the exemption.
In light of the Court of Justice of the EU’s decision in Commission v Luxembourg (Case C-274/15), from 15 August HMRC is to withdraw its current 85% test for services ‘directly necessary’ for the exempt or non-business activities eligible for the CSE. In its place, HMRC has added guidance to its CSE Manual, introducing a ‘suitable apportionment calculation’ for taxable or mixed-use services considered ‘directly necessary’. Groups may continue to use the current tests until 31 December.
