On 14 December 2023, HM Treasury published a Summary of Responses to its VAT Treatment of Fund Management Services Review.
The Government established that existing UK VAT legislation covered the vast majority of fund types for which management services should be VAT exempt. The government further considered that a list-based approach of Items 9 and 10 of Group 5 Sch. 9 of the VATA provided the industry with sufficient legal certainty.
The Government considered the calls for the introduction of a definition of ‘management’ of a fund in legislation to provide greater clarity on the application of the existing exemption, especially in regard to Items 9 and 10. The Government concluded that the current position established by settled case-law provided sufficient legal certainty. Although, the Government noted the request for greater definition in this area and will take this forward as part of the review of current guidance.
However, requests to zero rate fund management services to UK domiciled funds, to increase UK competitiveness in terms of fund domicile, and to expand the scope of the VAT exemption will not be taken forward.
AREF's Tax Committee have been overseeing this review and, where appropriate, will continue to lobby Government.
Consultation
On 3 February 2023, AREF submitted its response to HM Treasury and HMRC’s technical consultation on VAT in Fund Management. The consultation proposed reform of the VAT rules on fund management to improve legal clarity and certainty.
Acknowledging that VAT in the property sector presents unique challenges and differing opinions AREF has sought to offer a response which concentrates on consistency of approach and the need for a level playing field across all UK based fund types. This should include new vehicles such as the Professional Investor Fund and parity with similarly structured Authorised Contractual Schemes (‘ACSs’).
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