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Update for fund management VAT info

28 July 2008
Categories: News
Amending legislation and draft guidance now online

The amending legislation, explanatory memorandum and draft guidance relating to VAT exemption for fund management services have now been published on HMRC's website.

EU VAT law exempts 'the management of special investment funds as defined by Member States'. The UK interpretation of this was challenged and, following the European Court of Justice judgment in JP Morgan Fleming Claverhouse Investment Trust plc v HMRC (Case C-363/05),

HMRC accepted that closed-ended investment undertakings, such as investment trust companies, should be defined for the purposes of the exemption.

The amendment gives effect to this judgment in UK law and, in particular, defines 'closed-ended collective investment undertaking' by reference to certain criteria which must be satisfied.

These are that:

  • Its sole object is the investment of capital, raised from the public, wholly or mainly in securities.
  • It manages its assets on the principle of spreading investment risk.
  • All of its ordinary shares or equivalent units are included in the official list maintained by the Financial Services Authority.
  • All of its ordinary shares or equivalent units are admitted to trading on a regulated market situated or operating in the UK.

Although the amended law comes into effect on 1 October 2008, it represents the situation as it should have been since 1 January 1990 when the exemption was first introduced.

There is no requirement to make adjustments in respect of supplies made prior to 1 October 2008.

However, businesses which have accounted for VAT on fund management services which qualify for exemption under the amended legislation may wish to submit claims for output tax over-accounted for.


Categories: News
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