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HMRC internal manual

VAT Cost Sharing Exemption Manual

How the conditions are to be interpreted: Distortion of competition: How can the exemption lead to a ‘distortion of competition’?

A CSG is a cooperative self-supply arrangement. It is not a commercial outsourcing arrangement therefore it does not exist or compete in a market. As long as all the conditions of the exemption are met, particularly that it can only supply it’s members on a ‘direct reimbursement’ basis, that is, it self supplies at cost, there should be little question of the exemption distorting a market and therefore little question of failing to meet this condition.