VAT exemption for fund management services

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06 August 2008

New Regulations have come into force to implement the changes to the VAT exemption for fund management services following the ECJ decision in JP Morgan Fleming Claverhouse Trust plc v HMRC Case C-363/05.   The proposed changes were announced in the Budget this year.

HMRC have also published a Brief (35/08) to explain the changes, which are intended to give effect to the ECJ's judgment. 

The Regulations create a new category of exempt fund called a 'closed-ended collective investment undertaking', which must fulfil the following criteria:

  • its sole object is the investment of capital, raised from the public, wholly or mainly in securities
  • it manages its assets on the principle of spreading investment risk
  • all of its ordinary shares or equivalent units are included in the official list maintained by the FSA
  • all of its ordinary shares or equivalent units are admitted to trading on a regulated market situated or operating in the UK

The categories of open-ended funds which qualify for exemption have also been extended.

The Regulations come into effect on 1 October 2008 with retrospective effect (since they represent the law as it should have been since the exemption was first introduced).   Businesses may therefore make claims for overpaid VAT in respect of supplies made before 1 October this year.

All such claims are limited to a three year period except that, following the recent Fleming (t/a Bodycraft) and Conde Nast Publications cases, certain claims for overpaid VAT can be made in respect of accounting periods ending before 4 December 1996.  Revenue & Customs Brief 07/08 gives further information about such claims.

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