Exempt finance ― fund management

By Tolley
  • (Updated for Budget 2020)
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Exempt finance ― fund management
  • Management of investments and portfolios, funds, wrapper products and related services
  • What constitutes ‘management’?
  • Collective investment undertakings
  • Recovering input tax
  • Wrappers, wraps, nominee accounts and fund supermarkets
  • VAT treatment of wrapper products
  • Discretionary investment management services
  • Investment platforms
  • Conclusion

This guidance note provides an overview of the VAT treatment of investment fund management services.

Management of investments and portfolios, funds, wrapper products and related services

2006/112/EC Opens in a new window, Article 135 (1)(g); VATA 1994, Sch 9, Part II, Group 5, Items 9–10, note 6; SI 2008/2547; SI 2020/209; VATFIN5000; VAT Notice 701/49: finance Opens in a new window; De Voil Indirect Tax Service V4.136, V4.136A–V4.136J; VATFIN5100

The management of special investment funds is exempt from VAT. The UK exempts the following types of special investment funds:

  • authorised unit trust schemes (AUTS) that have the meaning given in Financial Services and Markets Act 2000, s 237(3)
  • authorised open ended investment companies (OEIC)
  • authorised contractual schemes that have the meaning given in Financial Services and Markets Act 2000, s 237(3)
  • a Gibraltar collective investment scheme that is not an umbrella scheme, or a sub-fund of any other Gibraltar collective investment scheme (defined in FSMA 2000, s 264)
  • an individually recognised overseas scheme that is not an umbrella scheme, or a sub-fund of any other individually recognised overseas scheme (defined in FSMA 2000, s 272)
  • a recognised collective investment scheme constituted in another EEA state that is not an umbrella scheme, or a sub-fund of any other recognised collective investment scheme constituted in another EEA state (see FSMA 2000, s 264)
  • (with effect from 1 April 2020) a ‘qualifying pension fund’ (broadly, a pension fund established in the UK or an EU member state, where the contributions to the fund are (a) spread over a range of investments, and (b) made solely by beneficiaries of the fund who bear the investment risk
  • a closed-ended collective investment undertaking

The above provisions do not cover a collective investment scheme, or sub-fund, that is not for the time being marketed in the UK if it has never been marketed in the UK or less than 5% of its shares or units are held by, or on behalf of, investors

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