VAT Treatment of Discretionary Investment Management Services
New guidance expected from HM Revenue & Customs.Discretionary Investment Management services (unless provided in the course of the management of certain special investment funds) are standard rated
New guidance expected from HM Revenue & Customs.
Discretionary Investment Management services (unless provided in the course of the management of certain special investment funds) are standard rated for VAT purposes. Until now HMRC's policy has been to treat a separate charge for arranging a securities transaction as exempt (and the passing on of the exact amount of a broker's charge as outside the scope of VAT on the basis that this is a disbursement).
In the case of Finanzamt Frankfurt am Main V-Höchst v Deutsche Bank AG (Case C - 44/11), the Court of Justice of the European Union has now confirmed, not only that discretionary investment management services are taxable, but also that the implementation of the service by buying and selling securities consists of two elements which are so closely linked that they form, objectively, a single economic supply.
HMRC are expected shortly to published revised guidance in the light of this decision. It seems inevitable that separate transactions charges by a discretionary manager will become standard rated (although it is possible that the disbursement treatment could survive).
Discretionary Investment Management services (unless provided in the course of the management of certain special investment funds) are standard rated for VAT purposes. Until now HMRC's policy has been to treat a separate charge for arranging a securities transaction as exempt (and the passing on of the exact amount of a broker's charge as outside the scope of VAT on the basis that this is a disbursement).
In the case of Finanzamt Frankfurt am Main V-Höchst v Deutsche Bank AG (Case C - 44/11), the Court of Justice of the European Union has now confirmed, not only that discretionary investment management services are taxable, but also that the implementation of the service by buying and selling securities consists of two elements which are so closely linked that they form, objectively, a single economic supply.
HMRC are expected shortly to published revised guidance in the light of this decision. It seems inevitable that separate transactions charges by a discretionary manager will become standard rated (although it is possible that the disbursement treatment could survive).