In this month's VAT updates, Graham Elliott, director at City & Cambridge Consultancy, considers the cost sharing exemption in light of the Kokott interpretation, VAT on new house builders blocked in Taylor Wimpey and disappointing ruling on cultural services in BFI case
Cost sharing exemption
The exemption for sharing of costs between largely exempt or non-business entities has proved difficult to apply in practice for a variety of reasons. These include the apparent need for a separate ‘VAT entity’, though not necessarily a separate legal person in the strict sense, through which to make the qualifying exempt supplies, the need for no profit margin to be added (which makes providing a buffer for bad trading conditions within the sharing group a serious logistical challenge), and the extent to which the final suppliers who are members of the group have to make supplies which qualify them for membership.
Advocate general Juliane Kokott has considered such issues in advance of a decision by the Court of Justice of the European Union (CJEU) in the cases of Aviva (C-605/15) and DNB Banka (C-326/15).
