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This Revenue & Customs Brief announces that HMRC have withdrawn from the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management services supplied to ITCs are exempt and have withdrawn from the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
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.
About the Author
© Crown Copyright 2007.
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Article Published/Sorted/Amended on Scopulus 2007-11-09 23:48:27 in Tax Articles