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HMRC internal manual

VAT Cost Sharing Exemption Manual

How the conditions are to be interpreted: Number of members and memberships: Who is responsible for the CSG’s VAT affairs - the members or the CSG?

As a single taxable person it is the CSG itself not its individual members that is responsible for its VAT affairs. However, the application of the exemption is dependent on the use to which the recipient members put the services received from the CSG. This is different from many other VAT exemptions where it is the nature of the supply or the nature of the maker or receiver of it which determines its tax treatment. CSGs must ensure that adequate controls exist to obtain the information necessary to correctly determine its VAT liability. It should be able to demonstrate to HMRC, when required to do so, that all the conditions of the exemption have been met by all of its members. Where a CSG has a member(s) in another (other) Member State(s) it may want to have particular rules covering non UK established members.

HMRC are not prescriptive about how CSGs should arrange themselves in this respect, as different CSGs will want to do so in different ways, in accordance with their members’ wishes and requirements. However, HMRC will expect any system that is put in place to provide a clear audit trail of how the services received from the CSG are utilised by those individual members in their operations.