 Talks on VAT savings finally underway
29 June 2011: The government's proposals on the introduction of a cost-sharing exemption from VAT have finally been published in a consultation document launched this week. EU law already allows 'non taxable' organisations, such as charities and exempt businesses, to save VAT by forming associations to share costs but the government has been dragging its feet on implementing the exemption in the UK.
Richard Wild, Director of VAT at PKF, said: "The commencement of the cost-sharing consultation exercise is long overdue - the exemption could give many charities a much needed cash boost. At first glance, the proposals appear to be a very positive step towards implementing the exemption in the UK."
"Some other EU states that have put the exemption in place already have done so in a half-hearted way - restricting its benefits. So, it is particularly pleasing that the government seems to be taking note of such issues and is proposing to apply the UK exemption across all exempt and non-business sectors."
"The government also appears to be taking an inclusive and pragmatic view of the type of support services that should qualify for the exemption: hopefully this will make it easier for organisations to realise the VAT savings that the EU rules are intended to make available."
Nick Warner, VAT partner at PKF, said: "We are pleased that the starting point of what appears to be a very positive consultation is to include all VAT exempt sectors, including finance and insurance. For exempt businesses that work across many locations, it may be useful in reducing VAT costs that often arise from the cross-border provision of such services, so I am particularly interested in HMRC's indication that they have no objection in principle to a multi-territory cost-sharing group."
"UK organisations that may benefit from cost-sharing should now start talking to other operators in their sector to see what scope they have to share support services. Such arrangements will take some time to set up, so start the process now to ensure your organisation gets the VAT savings as soon as the exemption is implemented."
Ends
For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. The cost sharing exemption exists to mitigate the VAT costs where a small or medium sized organisation, which undertakes non-taxable activities, buys in services that larger organisations would carry out in-house (i.e. without having to pay VAT to outside providers). The exemption
envisages smaller organisations 'clubbing together' to form an association to buy in or provide these services to its members. The association then shares the cost of the services to its member organisations, without having to charge VAT on these recharges. HMRC includes charities, colleges
and universities, housing associations, residential care homes, banks and insurance companies on its list of potential beneficiaries.
2. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and
entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic.
The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm's web site is www.pkf.co.uk
3. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
4. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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