Investment Trusts have suffered a Tax Set-Back on VAT

 The debate rages on over investment trust vs open-ended  funds (i,e, Mutual funds, collectives, Unit Trusts, OEICs, UCITS, etc).

Investment Trusts have suffered a setback in a long-running legal battle against HM Revenue & Customs (HMRC) to recover millions of pounds in VAT. PricewaterhouseCoopers, is trying to reclaim VAT paid to HMRC between 1997 and 2001. This follows a victory by the Association of Investment Companies (AIC) in 2007, which stopped VAT being levied on the investment management of trusts. This had the effect of leveling the taxation treatment with open-ended funds.

The High Court earlier this month has ruled that Investment Trusts will be unable to claim back VAT for the period between 1997 and 2001; and in principle could claim back the full amount of VAT for other periods.

Final judgment on this second issue has been adjourned pending the outcome of two decisions in the European Court of Justice and the UK Supreme Court, which will probably take years to be finalised.

Tags: Financial Planning, Investment Planning, Investment Trusts, ISAs, Pensions, portfolio investors, Retirement Planning, Wealth Management and Tax Planning