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Investment trusts win VAT exemption

The Association of Investment Companies has won its 10-year battle with HM Revenue & Customs for investment trusts to be exempt from VAT on management charges.

It says the victory could save the industry £40m a year and is calling on HMRC to repay £300m of VAT paid in the past.

HMRC withdrew from the AIC’s appeal to the UK VAT Tribunal last week and has accepted the European Court of Justice’s June judgment that trusts should be exempt from VAT on management expenses.

The AIC now wants the same VAT exemption for venture capital trusts.

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 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.”

JP Morgan Claverhouse 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.”


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