Abbey National has won the first round in a case against Customs & Excise over whether VAT should be...
Abbey National has won the first round in a case against Customs & Excise over whether VAT should be charged on the outsourcing of fund management to third-party management groups.
Under current Inland Revenue rules, while investment management carried out in-house by a fund manager is tax exempt, if an investment management group employs a third-party to carry out the fund management, it creates a VAT liability.
A VAT tribunal found that Abbey National did not have to pay VAT on payments to subcontractors Inscape for the management of the Inscape Investment Fund, Abbey National's flagship Oeic. Customs & Excise is to appeal against the decision.
John Kelly at Inscape said Abbey National had argued that applying VAT on outsourcing arrangements was against the interests of shareholders. He said: 'It is not possible for a single fund management company to be experts in every single field, so using the principle of best practice, we employ third-party managers who are the best managers in different fields to run different accounts. It was this principle that won the case.'
The IR has appealed against the decision which will now go to the High Court. If the decision is upheld, it will level the playing field, as it will now be financially viable for investors who want to take the third-party route to
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