United Kingdom - AIC and ECJ win VAT battle

The Association of Investment Companies is urging the HM Revenue & Customs to pay back some £300m of VAT paid in the past after the Government gave up it battle on invesmtent trusts being exempt from VAT on management expenses.

The AIC and JPMorgan Claverhouse Investment Trust plc had both been in a battle with the HMRC after it withdrew from the AIC’s appeal to the UK VAT Tribunal.

This means the HMRC is set to follow the European Court of Justice’s decision to make investment trusts exempt back in June.

In addition to recovering some £300m, the AIC expects the move to create an annual saving of some £40m per annum and has already called on the Government to implement the same VAT exemption to Venture Capital Trusts.

AIC director general Daniel Godfrey says: ““This victory concludes some 10 years of work by the AIC. Now that the Government has accepted that it was unlawful for it to levy VAT on the management fees of investment trusts, it should move quickly on the issue of back claims so that shareholders can benefit as soon as possible.

“We also call on the Government to use this opportunity to extend the VAT exemption to Venture Capital Trusts. The ECJ commented that the purpose of the VAT exemption was to enable private investors to benefit from collective fund management services without the imposition of VAT.”

JPMorgan Culverhouse Investment Trust chairman Sir Michael Bunbury says: “We are delighted that we have now officially won. JP Morgan Claverhouse suffered £460,000 in irrecoverable VAT last year. In future, this money, together with refunds relating to earlier years, should be available for shareholders. The benefit will compound into the future and further enhance shareholder value.”