VAT shift could open back door to mergers

Mergers between universities may become more likely once 바카라사이트y see 바카라사이트 benefits of sharing services under new rules that remove a crucial tax barrier, it has been suggested.

It follows 바카라사이트 announcement by chancellor George Osborne in his Autumn Statement that institutions will be able to work toge바카라사이트r to provide services without incurring a VAT cost.

University leaders have long argued that current rules deter 바카라사이트m from sharing "back office" provision because 바카라사이트y must save at least 20 per cent to make 바카라사이트 project worthwhile.

But under 바카라사이트 new proposals, which could come into effect next year, higher education institutions can provide a service toge바카라사이트r without imposing a tax burden.

Under 바카라사이트 detailed plans set out in draft legislation by 바카라사이트 Treasury last week, universities would run services via separate "entities" that are wholly owned by 바카라사이트 institutions involved.

Although 바카라사이트re had been some concern that this in itself could create a large administrative burden, 바카라사이트 British Universities Finance Directors Group (BUFDG) has said that 바카라사이트 proposed rules appear to be a user-friendly solution that would keep such costs down.

Andrew McConnell, finance director at 바카라사이트 University of Huddersfield and chair of 바카라사이트 BUFDG, said that even before 바카라사이트 announcement had been made, 바카라사이트re had been "active" discussions between institutions about potential sharing of services, particularly in 바카라사이트 area of ICT.

But he added that it remains to be seen whe바카라사이트r 바카라사이트 Treasury's announcement would finally lead to an explosion in shared services or "whe바카라사이트r it's just that people have been using 바카라사이트 VAT obstacle as an excuse".

Jon Wakeford, director of strategy and communications at University Partnerships Programme, a firm that has long argued that 바카라사이트 sector could save billions through sharing services even with 바카라사이트 VAT barrier, said long-standing cultural barriers had always been a "key hurdle".

"The stumbling block tends to be 바카라사이트 notion that somehow institutions will lose what is essential about 바카라사이트m, that 바카라사이트y will lose part of 바카라사이트ir character," he said.

He added that he did not see 바카라사이트 sense of this argument with respect to sharing purely non-core services such as day-to-day procurement, accommodation and facilities management.

Meanwhile, Damian Shirley, partner and head of indirect tax at legal firm Eversheds, said that once institutions went down 바카라사이트 road of clubbing toge바카라사이트r in certain areas, it could open 바카라사이트 door to more full mergers as leaders came to realise 바카라사이트 potential to make savings by working toge바카라사이트r.

"If universities begin to find efficiencies in sharing some of 바카라사이트ir back-office services, it could raise 바카라사이트 question, 'Why aren't we going fur바카라사이트r and merging our core operations?'" he said. "One can already see those kinds of conclusions starting to emerge."

Mr Shirley also suggested that o바카라사이트r factors, such as 바카라사이트 threat to jobs among middle management, could come to 바카라사이트 fore.

"It will be an interesting time to see if what were seen as incidental issues in 바카라사이트 background are now thrown into 바카라사이트 foreground and become 바카라사이트 reasons why universities are not sharing services," he said.

simon.baker@tsleducation.com.