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HMRC internal manual

VAT Cost Sharing Exemption Manual

How the conditions are to be interpreted: Directly Necessary services: What are ‘directly necessary’ services? (guidance effective from 15 August 2018)

Article 132(1)(f) requires that supplies made by CSGs to their members must be ‘directly necessary’ for their exempt and/or non-business activities. If they are not, the exemption does not apply and the supplies are subject to normal VAT rules.

This phrase directly necessary services includes both:

  • Services that are directly necessary for the CSG member’s relevant exempt and/or non-business activities; and
  • Any overheads that are directly necessary for, but only partly used, in those activities, but only to the extent that they are so used.