On 22 August 2019, HMRC published Revenue & Customs Brief 8 (2019) in which it announced the continued application of the VAT cost sharing exemption (CSE) to cost sharing groups (CSGs) implemented by social housing associations.
The CSE, broadly, provides an exemption for VAT on services provided within groups whose members make exempt (or non-business) supplies provided:
- the intra-group supplies are “directly necessary” to enable the group members to make such exempt (or non-business) supplies
- only each member’s exact share of the cost of the intra-group supplies are recovered, and
- exempting the intra-group supply would not lead to distortion of competition.
In 2017, ECJ decisions on the CSE held that its scope was limited to activities in the “public interest”. In light of this, HMRC issued Briefs in 2018 confirming that going forward the CSE would not be available for the banking and insurance industries (amongst others). The position for social housing groups was that they could continue to apply the CSE, pending a review.
The latest Brief is welcome news for the social housing industry as it confirms that social housing associations can continue to apply the CSE (as they meet the “public interest” requirement). Helpfully, HMRC also confirm that if further changes are required, HMRC will announce them giving at least 12 months’ notice (without retrospective effect).
For these purposes a “social housing association” is a housing association defined in section one of the Housing Associations Act 1985 and other registered social landlords who provide social housing for the benefit of the community, on a not-for-profit basis1. The CSG is not itself required to be a housing association and normally will not be such a body. The CSE does not apply to arrangements entered into by private landlords.
The Brief can be viewed here.