Cost sharing exemption: the end or the beginning?

The cost sharing group (CSG) exemption appears in article 132(1)(f) of the Principal VAT Directive (PVD). Despite being mandatory for member states to implement it was only enshrined in UK VAT legislation in FA 2012 with the introduction of a new Group 16 in VATA 1994 Sch 9: ‘supplies of services by groups involving cost sharing’.

HMRC’s reluctance to accept the need for the CSG exemption in practice was mirrored elsewhere in the EU. A number of member states have struggled to determine the purpose behind a provision which seems to have been agreed somewhat hurriedly at the end of a long negotiation process. In the UK HMRC used to assert that the UK...