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Following further consultation on changes to the VAT exemption for fund management services from 1 October 2008 (announced at this year's Budget), July's Value Added Tax (Finance) Order 2008 (SI 2008/1892) has been replaced to clarify the scope of some changes and to introduce a de minimis provision.
The amendments concern fund management services in respect of 'recognised overseas schemes', which are collective investment schemes established outside the UK, but are recognised by the Financial Services Authority for them to be marketed within the UK.
The first change focuses on funds that are constituted as umbrellas containing a number of distinct sub-funds.
In such a case, only management services provided in respect of each sub-fund marketed to UK investors are exempt. This follows the policy originally described in the draft guidance, now updated, and this is now made clear in the amended legislation.
The second change introduces a de minimis provision, whereby the management of a recognised overseas scheme (or each sub-fund if an umbrella), which is not for the time being marketed in the UK, and has never been marketed in the UK, or has less than 5% of its shares or units held by, or on behalf of, UK investors falls outside the VAT exemption.
The Value Added Tax (Finance) (No 2) Order 2008 makes these changes and the draft guidance has been updated.
