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No VAT exemption for a single supply of investment management services purchased to use for different funds

The Court of Justice of the European Union recently confirmed that there cannot be a separate VAT exemption, for investment management services provided to special investment funds in the following circumstances.

BlackRock Investment Management purchased investment management services that were provided via an IT platform from the US. Investment management services are in principle standard-rated and therefore subject to UK VAT under the reverse charge procedure.

However, if such services are provided to special investment funds, they are exempt from VAT. Blackrock used the platform services to manage both special investment funds and other funds. Blackrock argued that the VAT exemption for special investment funds should apply to the part of the platform services that were used for the special investment funds. This would mean that the reverse charge would not apply and no VAT, which Blackrock would be unable to recover, would be due in this respect.

However, the Court highlighted the principle that a single supply must be the subject of a single VAT treatment. Consequently, it ruled that a single supply of management services, provided by a software platform for the benefit of a fund management company, which manages both special investment funds and other funds, does not fall within the exemption for special investment funds.

It should be noted that VAT charged on fund management fees is currently under review as part of the wider Government review of the UK’s fund regime.

Would you like to know more?

If you would like to discuss the above, please get in touch with your usual Blick Rothenberg contact or Antje Forbrich whose details are to the right.