CSE3850 | How the conditions are to be interpreted: Directly Necessary services: What are ‘directly necessary’ services? (guidance effective from 15 August 2018)

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

The exemption in UK law requires that supplies made by CSGs to their members must be ‘directly necessary’ for their exempt and/or non-business activities. If they are not, the exemption does not apply and the supplies are subject to normal VAT rules.

This phrase directly necessary services includes both:

• Services that are directly necessary for the CSG member’s relevant exempt and/or non-business activities; and

• Any overheads that are directly necessary for, but only partly used, in those activities, but only to the extent that they are so used.

Revenue and Customs Brief 10 (2018) explains HMRC’s revised approach to the test for directly necessary services.