Budget 2011: disappointment on the EU cost sharing exemption

Charities will no doubt welcome the proposed simplification of Gift Aid and the inheritance tax incentive to leave over 10% of your estate to charity. However along with other organisations in the VAT exempt or non-business sectors there is disappointment with the apparent lack of progress towards implementation of the EU cost sharing exemption.

The cost sharing exemption is set out in the Principle VAT Directive at Article 132(1)(f). In essence it enables small and medium-sized organisations who undertake VAT exempt or non-business activities to ‘club together’ to buy in services which larger operators would carry out in-house. The exemption means these organisations do not have to charge each other VAT which could be wholly irrecoverable when passing on...