HMRC are currently considering enacting the VAT Cost Sharing Exemption. This is a provision of EC VAT law not currently applicable in the UK which allows businesses and organisations making VAT exempt and/or non-business supplies to form groups in order to achieve cost savings.

The principal benefit of the exemption is that by removing a VAT charge on supplies of goods and services between certain organisations, it will facilitate efficiency savings for organisations working together which are unable to recover all of their VAT on purchases.

If enacted, this exemption may enable cost savings on transactions between NHS bodies and social enterprises or charities, where these types of organisation have taken responsibility for previous NHS functions and the addition of VAT on re-charged costs can be a burden.

HMRC are due to publish their findings from a consultation process on policy design and a framework for possible future implementation. We will inform you of this as soon as further details are available.