Responding to the Treasury consultation on the VAT treatment of fund management services, the CIOT in principle welcomes the codification of policy ‘accurately and effectively, without unintended consequences, where such reform increases clarity and certainty for taxpayers and their advisers’. The underlying reason for consultation was the proposal to put existing practice onto a legislative footing, rather than changing the current VAT liability of fund management services, the aim being to clarify whether a financial product meets the definition of special investment fund (SIF) and whether the management services are therefore exempt from VAT.
The response includes a number of key points:
The CIOT supports the retention of the list of exempt fund types in VATA 1994 Sch 9 Group 5 items 9 and 10 in order to provide certainty on the VAT liability of management services of pre-existing SIFs within the revised legislation.
The proposed approach does not, however, appear to achieve its aim of maintaining the scope of the existing exemption; the proposals do not explicitly address the UK VAT treatment of the management of non-UK funds. This could lead to additional uncertainty rather than the desired clarity.
The proposed definition of a SIF makes reference to the EU definition of ‘UCITs’. The Institute notes that the comparison with EU law seems strange, and ‘at odds with the aims of this project’, particularly if the EU definition should evolve over time.
The proposals also do not appear to provide any greater clarity as to the definition of ‘management’ – a term essential to the interpretation and application of the exemption.
A UK VAT definition of ‘collective investment’, self-contained within the UK VAT legislation, which could be used to help identify a SIF for UK VAT purposes, could bring greater clarity.
Responding to the Treasury consultation on the VAT treatment of fund management services, the CIOT in principle welcomes the codification of policy ‘accurately and effectively, without unintended consequences, where such reform increases clarity and certainty for taxpayers and their advisers’. The underlying reason for consultation was the proposal to put existing practice onto a legislative footing, rather than changing the current VAT liability of fund management services, the aim being to clarify whether a financial product meets the definition of special investment fund (SIF) and whether the management services are therefore exempt from VAT.
The response includes a number of key points:
The CIOT supports the retention of the list of exempt fund types in VATA 1994 Sch 9 Group 5 items 9 and 10 in order to provide certainty on the VAT liability of management services of pre-existing SIFs within the revised legislation.
The proposed approach does not, however, appear to achieve its aim of maintaining the scope of the existing exemption; the proposals do not explicitly address the UK VAT treatment of the management of non-UK funds. This could lead to additional uncertainty rather than the desired clarity.
The proposed definition of a SIF makes reference to the EU definition of ‘UCITs’. The Institute notes that the comparison with EU law seems strange, and ‘at odds with the aims of this project’, particularly if the EU definition should evolve over time.
The proposals also do not appear to provide any greater clarity as to the definition of ‘management’ – a term essential to the interpretation and application of the exemption.
A UK VAT definition of ‘collective investment’, self-contained within the UK VAT legislation, which could be used to help identify a SIF for UK VAT purposes, could bring greater clarity.
