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In Kaplan International Colleges UK Ltd (KIC) v HMRC (C 77/19), the European Court of Justice (CJEU) ruled that HMRC was correct to deny a cost-sharing exemption to its subsidiary in Hong Kong.

KIC appealed to the First Tier Tribunal (FTT) which referred several questions on the correct interpretation of the VAT Directive to the Court of Justice.

The CJEU followed Advocate General Kokott’s opinion issued in April 2020, who had concluded that the Directive merely allows VAT exemption for supplies by a cost-sharing group to its members. It does not qualify or limit the provision but concluded that the EU legislature did not have in mind cross-border groups outside the EU.

As such, the interpretation puts cost-sharing groups on exactly the same footing as VAT groups membership which is restricted to entities established in the same Member State. The CJEU, therefore, came to the same conclusion as HMRC.

Useful guides on this topic

Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

Costs sharing exemption
Charities, universities and colleges can share costs without triggering a VAT charge by forming a Cost Sharing Group (CSG) under the cost-sharing exemption.

Education & VAT
What rate of VAT applies to education? What sort of services are classed as education? What do you do if your have multiple supplies including education?

External link

Kaplan International Colleges UK Ltd (KIC) v HMRC (C 77/19)