Revenue & Customs Brief 58/07

VAT: Claims in respect of fund management services

This Revenue & Customs Brief sets out HMRC’s current position concerning claims made in respect of VAT charged on fund management services.

Background

The EC VAT Directive (formerly the Sixth Directive) exempts 'management of special investment funds as defined by member states'. The UK applies this exemption to the management of authorised unit trusts (AUTs), open-ended investment companies (OEICs) and trust-based schemes. The UK has not applied this exemption to the management of other funds, including investment trust companies (ITCs).

In 2004, JP Morgan Fleming Claverhouse Trust plc, an ITC, appealed to the VAT Tribunal against the VAT charged to it on investment management services. This appeal was joined by the Association of Investment Trust Companies (now the AIC) and the Tribunal referred 3 questions to the European Court of Justice (ECJ). In its judgment of 28 June 2007, the ECJ has given guidance to the Tribunal to determine whether the management of ITCs should be VAT exempt.

Claims concerning the management of ITCs

We have received a number of claims for overpaid VAT on the management of ITCs since the litigation began in 2004. The claims concerning such services have been held over pending the final outcome in the litigation, and will be addressed in due course.

Claims concerning the management of funds other than ITCs

Since the ECJ judgment, we have also received a number of claims for overpaid VAT in respect of the management of other funds not at issue in the litigation. Such claims have generally contained a request that they be held pending the final outcome in the JP Morgan Fleming Claverhouse case, using the ECJ judgment as support for the claims.

We take the view that this case does not concern the management of funds other than ITCs and that the ECJ judgment is clear in that it does not address the issues that arise concerning such other funds. There is thus no basis for HMRC to accept these claims, nor any current litigation against which to justify holding over the claims. Accordingly, any such claims in respect of the management of funds other than ITCs will be refused. This is in line with our existing published guidance (see paragraph 2.7 of 'V1 - 33: VAT refunds - unjust enrichment - statutory interest - ex-gratia payments').

Issued 22 August 2007