VAT is to be scrapped on funds which have their management outsourced, after Abbey National won a landmark case against Customs and Excise.
Previously Oeics and unit trusts were only exempt from VAT if their investment management was carried out by the plan manager.
However, Abbey challenged Customs over the case of its Inscape fund. The tribunal found in favour of Abbey on the grounds that Customs' argument was not consistent with an EU directive.
Customs could now be facing a sizeable payout to the investment industry.