The UK funds trade body the IMA has suggested to the European Commission (EC) that all transactions ...
The UK funds trade body the IMA has suggested to the European Commission (EC) that all transactions carried out via intermediaries should be VAT-exempt.
It put forward its proposal in its submission to the EC's consultation paper, Modernising VAT Obligations For Financial Services and Insurance.
A VAT exemption exists where a transaction is carried out between an adviser and a management group. However, with products becoming increasingly intermediated, transactions by advisers through fund supermarkets for example, the VAT situation is unclear, according to the IMA.
Julie Patterson, director of regulation, operation and taxation at the IMA, said if the situation is unresolved, it could lead to inconsistency, with investors affected differently if charged on the basis of commission or fees and depending on what channel they use to transact their investment.
The UK trade body also feels the current special investment funds exemption is unclear as there is little certainty as to what types of vehicle fall within this exemption.
The IMA suggests the exemption should clearly apply to the functions of management, whoever supplies them, allowing for the exemption of the outsourcing.
Patterson added: "The status quo on the EU VAT legislation is simply not tenable. The current situation gives rise to unacceptable high levels of uncertainty and the risk of retrospective financial impacts.
"There is a clear need for closer alignment of Member States' implementation and interpretation of the rules in order to ensure administrative and legal costs remain small relative to tax take.
"Amendments to the legislation are necessary in order to improve consistency and certainty for financial services companies, but such changes must be coupled with appropriate transitional periods to allow companies, their suppliers and their customers to adjust."
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