A university is planning to contract repair and maintenance services from a housing association in order to take advantage of a government scheme that deducts VAT from shared services.

The unnamed institution could save about £300,000 a year from the arrangement, according to a senior employee at consultancy PricewaterhouseCoopers, which is working on the deal.

Richard Wallace, tax director, education sector at PwC, explained to a conference in London on 15 May organised by the Westminster Education Forum that the university, the housing association and two further education colleges were looking to form a “cost-sharing group” that would enable them to trade services VAT-free.

The university currently spends “well over a million pounds” on repair and maintenance services, he said, so it could save significant sums of money if it did not have to pay 20 per cent in VAT.

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In return, the housing association would gain more business, leading to economies of scale and lower per-unit repair costs, he told the seminar, titled Higher Education Finances - TRAC Reporting, Shared Services and Diversifying Income Streams.

“Everybody is a winner,” Mr Wallace added.

In November 2011, the government announced that universities that shared services would no longer create a new VAT liability. The sector had long complained that VAT was a barrier to shared service projects, because it meant they had to make savings of at least 20 per cent in order to be economical.

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But no successful shared services projects have yet been announced, and concerns were raised at a conference in December last year that the apparent lack of enthusiasm might antagonise the government.

Speaking at Shared Services in Higher Education: Achieving Proficiency, Improving Performance, Jamie Arrowsmith, a policy researcher at Universities UK, said: “I don’t think any of us wants a situation where the government turns round and says: ‘Well, you’re not doing any work on this, no one actually wants it.’ “

And Steve Butcher, head of procurement at the Higher Education Funding Council for England, told a UUK conference in February that “lots and lots” of universities were ready to cement such schemes, of which there would be a “first wave” in the summer.

Mr Wallace admitted that the VAT exemption had not so far led to a “stampede” of service-sharing schemes but said there was “far more activity” than before and that PwC was working on several such projects involving student accommodation, IT and human resources.

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david.matthews@tsleducation.com