VATFIN5220 - Management of investments, portfolios, funds, ‘wrapper’ products and related services: VAT exemption for the management of open-ended collective investment schemes: introduction and legal provisions

Item 9 and the Notes to Group 5 (amended from 1 October 2008) set out the open-ended funds to which the exemption applies. In summary these are collective investment schemes which are:

• all UK-established AUTS and authorised OEICs; or
• recognised overseas schemes.

The UCITS Directive provides a framework for the common regulation of open-ended CIU within the European Economic Area (EEA). The case-law has made it clear that CIU complying with the UCITS Directive are ‘special investment funds’ for the VAT exemption. The relevant UK regulations refer to Collective Investment Schemes (CIS) and this term applies to UK AUTS and OEICs. Most of these are UCITS compliant, but there are also ‘non-UCITS retail schemes’ (such as real estate funds and certain types of funds of funds) and ‘non-retail’ schemes (qualified investor schemes or ‘QIS’).

Recognised overseas schemes fall into three basic categories:

• Collective investment schemes established elsewhere in the EEA, which are authorised as UCITS-compliant in their own Member State and where notification has been given to the FSA of the intention to market the units to UK retail investors. This category will also cover schemes established in Gibraltar.
• Collective investment schemes established in Guernsey, Jersey, the Isle of Man and Bermuda, which have similar regulation to UK CIS and have been recognised by the FSA so that their units can be marketed to UK retail investors.
• Collective investment schemes established elsewhere, which have similar regulation to UK CIS and have been given an individual recognition order by the FSA so that their units can be marketed to UK retail investors.