Investment trust companies to seek £300m VAT rebate
Investment trust companies (ITCs) are celebrating their victory at the European Court of Justice on 28 June when it was ruled that the term “special investment funds” can include closed-ended investment funds, such as ITCs. As a consequence they should benefit from the same exemption from VAT for fees paid for management services, as presently enjoyed by unit trusts and OEICs..
The case was brought by JP Morgan Fleming Claverhouse Investment Trust plc and The Association of Investment Companies. The Association say investment trusts have been unfairly charged VAT on management expenses since 1990 to the detriment of their shareholders. The case now goes back to the VAT Tribunal but the Association are calling for the Government to implement the ruling as soon as possible. They anticipate it could save the industry £40m a year and that the potential VAT rebate due in respect of past payments amounts to £300m.
Good news then if you are a shareholder.
The ECJ held that Member States have discretion in defining the funds covered by the term “special investment funds” but must respect the objective of the exemption which is to facilitate investment in securities through investment undertakings. The principle of fiscal neutrality means that VAT should not be charged on the management of one type of investment fund which is in competition with another type of fund that benefits from the exemption.
Some are speculating that this could open the floodgates to claims by other pooled investments such as pension funds and venture capital trusts. If so the eventual cost to the Exchequer could be very high indeed.
The case was brought by JP Morgan Fleming Claverhouse Investment Trust plc and The Association of Investment Companies. The Association say investment trusts have been unfairly charged VAT on management expenses since 1990 to the detriment of their shareholders. The case now goes back to the VAT Tribunal but the Association are calling for the Government to implement the ruling as soon as possible. They anticipate it could save the industry £40m a year and that the potential VAT rebate due in respect of past payments amounts to £300m.
Good news then if you are a shareholder.
The ECJ held that Member States have discretion in defining the funds covered by the term “special investment funds” but must respect the objective of the exemption which is to facilitate investment in securities through investment undertakings. The principle of fiscal neutrality means that VAT should not be charged on the management of one type of investment fund which is in competition with another type of fund that benefits from the exemption.
Some are speculating that this could open the floodgates to claims by other pooled investments such as pension funds and venture capital trusts. If so the eventual cost to the Exchequer could be very high indeed.
