VAT has always been seen in the sector as a barrier for sharing assets between partly exempt organisations such as universities. This is because, in most circumstances, when an asset is supplied from one party to another VAT must be levied on that charge. The VAT charge will be, at best, only partly reclaimable by the recipient, thereby introducing a worst case 20% cost to asset sharing, which could negate the financial efficiency reasons for sharing.

In order to minimise the impact of VAT charges associated with sharing equipment the VAT working group have been liaising with HMRC to review the most appropriate methodologies that can be used to maximise relevant VAT exemptions. Work within this area has concentrated around making the most of the VAT exemption for “Cost Sharing Groups” legislation introduced by HMRC in autumn 2012.

This work strand is primarily focused on creating a framework that will enable HEIs sharing equipment to meet the terms of the VAT Cost Sharing Exemption (CSE). Unless the terms of the CSE are met then 20% is required to be added to charges for equipment, which is a clear financial dis-incentive, increasing the costs of sharing assets and services. Initial work completed by the work strand lead identified a particular Cost Sharing Group (CSG) model as the most appropriate mechanism to enable VAT CSE.


The VAT efficiencies created via the effective use of a CSG will be an important benefit; the real value of CSGs will be in the impact of their application as part of an overall package to facilitate effective collaborative research which contributes to the efficiency of the HE sector in general, and efficient use of the Science budget in particular.

In addition, recent applications to some Research Councils for strategic equipment subject to assessment (over £135,688) have demonstrated that a lot of weight is being given to research collaboration between institutions and the infrastructure for efficient sharing of equipment in the success of bids. In some cases the extent of efficient collaboration can also influence the expected level of matched funding required from bidding institutions. It is expected that CSGs will mainly be used where the criteria for sharing the equipment will be part of the competitive award winning process, and thereby assist the N8’s collaborative research growth.

To take advantage of the CSG it will be necessary for each N8 university to establish a CSG itself and to have a membership/shareholding in each of the other CSGs. Each N8 university will also be required to lease capacity to its CSG, and in order to access the asset, the using University will need to purchase use from the relevant CSG. Additionally the CSG will be required to have some form of membership structure in place.