BB/7C/06 VAT—exemption for the management of authorised collective investment schemes
Business Brief, Issue 7. 27 June 2006
This Business Brief article announces changes to HMRC's policy concerning the VAT exemption for the management of authorised collective investment schemes, following the judgment of the European Court of Justice (ECJ) in case C-169/04, Abbey National Plc & Inscape Investment Fund (“Abbey”), on 4 May 2006.
It updates the section of Business Brief 10/03 headed 'What constitutes “management”?' and the changes apply from 1 October 2006.
Article 13B(d)(6) of the Sixth VAT Directive exempts “Management of special investment funds as defined by Member States”. The United Kingdom applies this exemption to the management of authorised unit trusts (AUTs), and of the scheme property of open-ended investment companies (OEICs). The exemption is effected in UK law by items 9 and 10 of Group 5, Sch 9 to VATA 1994.
HMRC's policy has been to apply the exemption to fund management in a strict sense, ie where it involves the assessment of financial risks, the making of investment decisions as to both the selection and disposal of assets under management and a direct involvement in the transactions concerning the assets of the fund, mainly in securities. Services not comprising such investment management functions, such as fund accounting and administration services, were regarded as taxable.
Abbey challenged this interpretation and appealed to the VAT & Duties Tribunal against VAT charged to it on fund accounting and administration services and also against VAT charged to its funds on depository and trustee services.