On 22 March 2018, HMRC published Revenue & Customs Brief 3 (2018), which sets out changes to the VAT exemption for cost sharing groups following various CJEU decisions on its scope.

Of the immediate effects, from 22 March 2018:

• the cost sharing exemption (CSE) will be restricted to certain categories of exempt business, such as education, health and welfare, and fundraising charities, but excluding, among others, banking insurance and property business. There will be interim measures for existing cost sharing groups that have operated the previous guidance correctly. In any case of avoidance or abuse, HMRC will apply any guidance from the court from the date of the judgment

• HMRC policy will be amended to restrict the CSE to members located in the UK. It will no longer be permitted to apply the exemption for transactions with members located in other EU member states. The CSE is not available for members located outside of the EU, and this will remain the position, and

• a CSE will not be permitted where an uplift has been charged on transactions for transfer pricing purposes. It will remain the position that the CSE will not be permitted in any other case where exact reimbursement cannot be evidenced.

A copy of the guidance is available to view here.