From 15 August 2018, HMRC is to withdraw its current 85% ‘directly necessary’ test, under which cost-sharing group members whose exempt or non-business activities make up at least 85% of their total activities can treat all supplies received from the group as eligible for the cost-sharing exemption (CSE). In its place, HMRC has added new guidance to its CSE manual, introducing a ‘suitable apportionment calculation’ for taxable or mixed-use services regarded as ‘directly necessary’.
Revenue and Customs Brief 10/2018 outlines the changes, which follow HMRC’s review of the exemption in response to recent ECJ judgments, as explained in R&C Brief 3/2018 and VAT Information Sheet 2/2018. Groups may continue to use the current tests until 31 December 2018, allowing them time to adjust to the new apportionment. See https://bit.ly/2vogDLl.
The new guidance, applicable from 15 August, is set out in the following sections of the CSE manual:
CSE3850: What are ‘directly necessary’ services?
CSE3855: How may ‘directly necessary’ services be identified?
CSE3860: How is apportionment to be made?
CSE3865: Requirement for the CSG to have a partial exemption method
CSE3870: Members partially exempt: what happens if no apportionment is made?
CSE3875: Annual adjustments and error correction
CSE3880: Use of special methods by members of CSGs
CSE3885: Members with non-business activities: How is apportionment to be made?
From 15 August 2018, HMRC is to withdraw its current 85% ‘directly necessary’ test, under which cost-sharing group members whose exempt or non-business activities make up at least 85% of their total activities can treat all supplies received from the group as eligible for the cost-sharing exemption (CSE). In its place, HMRC has added new guidance to its CSE manual, introducing a ‘suitable apportionment calculation’ for taxable or mixed-use services regarded as ‘directly necessary’.
Revenue and Customs Brief 10/2018 outlines the changes, which follow HMRC’s review of the exemption in response to recent ECJ judgments, as explained in R&C Brief 3/2018 and VAT Information Sheet 2/2018. Groups may continue to use the current tests until 31 December 2018, allowing them time to adjust to the new apportionment. See https://bit.ly/2vogDLl.
The new guidance, applicable from 15 August, is set out in the following sections of the CSE manual:
CSE3850: What are ‘directly necessary’ services?
CSE3855: How may ‘directly necessary’ services be identified?
CSE3860: How is apportionment to be made?
CSE3865: Requirement for the CSG to have a partial exemption method
CSE3870: Members partially exempt: what happens if no apportionment is made?
CSE3875: Annual adjustments and error correction
CSE3880: Use of special methods by members of CSGs
CSE3885: Members with non-business activities: How is apportionment to be made?
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