Revenue and Customs Brief 8 (2019) - review of the VAT exemption for cost sharing in social housing
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Published 27 August 2019
Purpose of this brief
This brief explains HMRC’s conclusions following its review of
the application of the cost share exemption (CSE) to the social housing sector.
It announces the continued application of the CSE to cost sharing groups (CSGs) implemented by social housing
Who should read this brief
This brief should be read by UK housing associations who have
implemented a CSG, or are
thinking of implementing a CSG,
and have relied on HMRC’s published guidance in the VAT
Cost Sharing Exemption Manual.
Accountants, consultants and others who provide VAT advice to the
businesses referred to above should also read this brief.
Definition of Social
This brief applies to housing associations defined in section one of
Associations Act 1985 and other registered social landlords who
provide social housing for the benefit of the community, on a
It also applies to the equivalent bodies in Scotland and Northern
Ireland. The CSE applies to CSGs established by social housing
associations that meet the conditions described in the VAT
Cost Sharing Manual (CSE
whether or not the CSGs are
VAT grouped with the housing association or VAT registered separately.
The CSG is not itself
required to be a housing association and normally will not be such a
The cost share exemption does not apply to arrangements entered into
by private landlords.
Revenue and Customs Briefs (3)
2018 and (10)
2018 detailed various changes that have already been incorporated
in the VAT
Cost Sharing Exemption Manual.
In that manual (CSE 1060),
HMRC announced that
it would be carrying out a review of the application to social housing
The Court of Justice in DNB Banka AS (Case C-326/15) concluded that
the CSE only applies to
independent groups of persons whose members carry on an activity in the
The court was concerned specifically with financial services and did
not consider the treatment of social housing associations which make
rental supplies which are also in the public interest.
In the absence of a court judgement relating specifically to them,
HMRC considers that the existing arrangements should continue for
social housing associations.
The CSE allows persons
who carry on activities covered by certain exemptions to join together
to form a CSG so they can
acquire services and recharge their members for their use of the
services at cost without incurring any additional non-recoverable VAT.
The circumstances where the CSE
applies are fully explained in the VAT
Cost Sharing Exemption Manual CSE
for application of the CSE
to CSGs in the social housing
The conditions set out in the VAT
Cost Sharing Exemption manual (CSE
1250) apply equally to the social housing sector.
Further to those conditions:
- there must be no uplift of internal or external costs (for
example, resulting in a margin or profit on actual costs being
recharged) within the CSG
- there must be no uplift of the costs being shared within any VAT
group including either, the CSG
itself, and or the members of the CSG
- there must be no uplift of costs by a VAT group member supplying
a CSG in the same VAT group
- there must be more than one member of the CSG, the count does not include
members that are in a VAT group either with the CSG, or with other members
- the CSG only applies to
providers of social housing (registered social landlords) and not to
private housing providers
Next steps and
timing of any further changes
HMRC will be amending the VAT
Cost Sharing Exemption Manual to incorporate these changes which
have immediate effect.
Housing associations and their corporate groups can continue to use
the cost share arrangements subject to the above conditions. If further
changes are required, HMRC intends to announce them giving at least 12
months’ notice. Any such changes would not have retrospective
CSGs should consider the
impact of the conditions on their existing arrangements and amend them
if necessary to comply with all the conditions.
Contact HMRC at the HA mailbox: firstname.lastname@example.org if
you need more information.
About the Author
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Article Published/Sorted/Amended on Scopulus 2019-08-27 22:00:00 in Tax Articles