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HMRC internal manual

VAT Cost Sharing Exemption Manual

How the conditions are to be interpreted: Some particular forms of Cost Sharing Groups: Partnerships have to be for profit; can they be CSG’s as a CSG can only seek ‘an exact reimbursement of Costs’?

If a ‘for profit’ partnership also makes supplies that fulfil the conditions of the cost sharing exemption then they can form a CSG but the exemption would only apply in respect of those services that satisfied all the conditions of the exemption, including the ‘exact reimbursement of costs’.

This situation might occur, for example, if the partnership (as a CSG) also made supplies to third party, non-CSG (Partnership) members, where a profit element could be added and VAT would have to be charged, at the appropriate rate.