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HM Revenue and Customs Brief 65/07


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Issued 5 November 2007

VAT: JP Morgan Fleming Claverhouse Trust plc fund management services

This Revenue & Customs Brief announces that HMRC have withdrawn from the appeal in JP Morgan Fleming Claverhouse Trust plc.

On 28 June 2007, the European Court of Justice (ECJ) delivered its judgment in this case which gave guidance for the VAT Tribunal to decide, on the facts, whether fund management services provided to investment trust companies (ITCs) should be exempt from VAT.

After careful consideration of the ECJ judgment, we now accept that fund management services supplied to ITCs are exempt and have withdrawn from the appeal. We remain of the view, published in Revenue & Customs Brief 58/07, that the judgment does not apply to funds other than ITCs.

Supplies affected by this decision

In an earlier ECJ judgment in Abbey National, it was ruled that the exemption for 'management' of funds covers not only investment management services, but also certain administrative services if, viewed broadly, they form a distinct whole and are specific to, and essential for, the management of the fund.

We published detailed guidance on this in Business Brief 07/06, but it should be noted that the Abbey judgment focused on authorised investment funds such as authorised unit trusts and open-ended investment companies. In this context, the court referred to the UCITS Directive, which sets out certain administrative functions that these funds are required to carry out.

Our revised policy was to exempt services, usually made up of several elements, forming single supplies which are recognisable in their own right as fund administration services. On the other hand, we made it clear that just because a service is a requirement of the regulations does not mean that it is exempt for example, some legal services may be specific to and essential for the administration of the fund, but they remain legal services, not fund administration services.

Although ITCs are not subject to the same form of regulation, we believe the same principles should apply. For ITCs, services which are specific to, and essential for their administration (or provisions relating solely to ITCs) may be exempt if, viewed broadly, they form a distinct whole recognisable as a fund administration service. More generic management services, such as company secretarial services and accounting, remain taxable if they are not otherwise subsumed into a single composite supply of fund administration services.


Businesses may exempt fund management services supplied to ITCs, but we cannot require this until such time as the UK law is amended. We expect to consult informally with key stakeholders in the coming weeks on possible legal changes in this regard.

Claims for overstated or overpaid VAT

Any claims for overstated or overpaid VAT on fund management services supplied to ITCs will now be dealt with in accordance with our Business Brief 28/04 Correcting liability errors; Notice 700/45 How to correct VAT errors and make adjustments or claims; and published guidance V1 - 33: VAT refunds - unjust enrichment - statutory interest - ex-gratia payments.

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© Crown Copyright 2007.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2007-11-09 23:48:27 in Tax Articles

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