The above Brief announces publication of HMRC guidance on Group 16 - Supplies of services by groups involving cost sharing which is to be found in VAT Information Sheet 07/12.

The Brief announces the introduction into law of a new group 16 to Schedule 9 of the VAT Act 1994. This follows the receipt of royal assent of the Finance Bill on 17 July 2012. The new group 16 to Schedule 9 to the VAT Act 1994 deals primarily with the Cost Sharing Exemption provision.

The exemption applies when two or more organisations (whether businesses or otherwise) with exempt and/or non-business activities join together on a co-operative basis to form a separate, independent entity, a cost sharing group (CSG), to supply themselves with certain services at cost and exempt from VAT.

The exemption applies to supplies of certain qualifying services that are made by the representative member of the CSG to other members of the CSG. These supplies must be ‘directly necessary’ for the exempt and/or non-business supplies made by the individual qualifying member.

HMRC is initially publishing its guidance in VAT Information Sheet 07/12 which explains how the exemption can be enacted.