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HEFCE closed at the end of March 2018. The information on this website is historical and is no longer maintained.

Many of HEFCE's functions will be continued by the Office for Students, the new regulator of higher education in England, and Research England, the new council within UK Research and Innovation.

The HEFCE domain - - will continue to function until September 2018. At this point we will close the site entirely and all its information will only be available from the National Web Archive.


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There is growing interest across the sector in the benefits of shared services and in the introduction of the cost sharing groups (CSG) exemption to Value Added Tax (VAT). After lobbying by the higher education and charity sectors, Article 132.1(f) of the EU VAT directive has been implemented by the Finance Act 2012. It allows for organisations called cost sharing groups to be established, to supply VAT-exempt services to member organisations that are themselves providers of VAT-exempt services and supplies. These new structures can offer services to institutions more cost-effectively and with no VAT impact. Existing shared service organisations within the sector can reduce the VAT impact on their members by operating as CSGs.

This guidance sets the context of the cost sharing exemption for higher education. It allows existing providers of services to understand the issues which must be addressed to take advantage of the exemption, as well as identifying areas of service which do not need to be structured as a cost sharing group as they are not liable to a VAT charge. It also examines areas which are being clarified by the experience of groups currently establishing CSGs.

The guidance is a new form of publication for HEFCE. The publication is hyperlinked so that the reader can find the areas which are of interest in their specific circumstances, and tailor their reading of the guidance for their own purposes. We do not recommend printing the publication, as this would eliminate this useful functionality.

We intend to update the guidance regularly with new information as this becomes available. A circular letter will be published in October 2013 inviting proposals from institutions who either have some experience of applying the VAT cost sharing exemption or are developing shared services in light of these changes. Good practice that arises from these projects will be used to enhance this guidance.

For further information contact Steve Butcher, Head of Procurement and Shared Services, tel 0117 931 7425, e-mail

Date: 2 September 2013

Ref: Independent research