Magazine article The Times Higher Education Supplement : THE

A Service Shared May Be a Financial Problem Halved

Magazine article The Times Higher Education Supplement : THE

A Service Shared May Be a Financial Problem Halved

Article excerpt

Waves of cost-cutting schemes expected once VAT exemption rules are clarified. Jack Grove writes.

Universities are expected to unveil a glut of new shared services schemes this summer to help cut costs in the sector, a senior funding council officer has revealed.

Steve Butcher, head of procurement at the Higher Education Funding Council for England, said he expected several universities to announce their own "cost-sharing groups" (CSGs) when rules about VAT exemption are clarified in May.

Up until 2011, universities complained that sharing services such as payroll or IT would create a fresh tax liability because - unlike individual institutions - such joint ventures were not exempted from charging VAT.

Chancellor George Osborne appeared to remove this tax barrier by making shared services VAT exempt in his Autumn Statement in November 2011, but HM Revenue & Customs guidance published in July 2012 indicated that the exemption would apply only in "very specific circumstances".

On 26 February, addressing a conference organised by Universities UK titled Efficiency in Higher Education, Mr Butcher said the forthcoming publication of Hefce guidance on VAT exemption in May was likely to lead to the announcement of several new CSGs.

"Lots and lots of organisations will be ready to go," he said.

He explained that there will be a "first wave" of shared services companies this summer, followed by "second and third waves", with some institutions also seeking to enlarge the remit of existing CSGs.

Such shared services organisations can often deliver savings through economies of scale. …

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