Following a two year project exploring VAT tax exemptions through a Cost Sharing Group (CSG) for universities which share equipment, the N8 Research Partnership has concluded that too many legal and financial hurdles exist.

Cost-Sharing Exemption

Funded by the Higher Education Funding Council for England, N8 have been working towards utilisation of the VAT Cost Sharing Exemption.  By utilising the N8 High Performance Computing capability as a model facility for implementing a CSG, it was hoped to demonstrate the value and viability using an existing shared asset:

  • Each N8 university would need to establish a company as a cost sharing group (CSG) itself, and to have a membership/shareholding in each of the other CSGs set up by the remaining N8 member universities.
  • Each N8 university would also be required to lease equipment capacity to its CSG; and in order to use the asset, the accessing university would need to purchase use from the relevant CSG. Additionally, each CSG would be required to have a clear membership structure in place.


HMRC Ruling

However, HMRC ruled that a CSG cannot exist within a VAT group.  This means that a CSG has to be formed outside of a university’s VAT group, and any equipment leased to that CSG would incur a VAT charge, simply moving the VAT charge to elsewhere in the supply chain.

Next Steps

Dr Peter Simpson, Director, N8 Research Partnership, said: “HMRC guidance currently does not encourage uptake of CSEs in Higher Education. This seems to run counter to the stated government and sector desires to increase HEI efficiency and to ensure optimised use of high cost equipment that in many cases is taxpayer funded.

“Despite this, a way forward will need to be found because greater efficiency in Higher Education remains vital.

“We therefore recommend that government works with HMRC and HEI-representative organisations to identify an acceptable process for which the sharing of equipment can avoid financial penalties.”

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 Implementation of Cost-Sharing Exemption in Universities

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