HMRC to issue guidance on landmark DFM VAT ruling
UK tax authority to issue guidance on European ruling that legally obliges discretionary managers to levy VAT.
HM Revenue & Customs (HMRC) has said it will issue guidance, after the European courts have ruled that discretionary managers must collect VAT on their services.
A spokesperson said: “HMRC welcomes the judgment of the ECJ in Deutsche Bank. We are currently reviewing the details of the judgment to determine whether it has any implications for the current UK VAT treatment of investment management services, and will issue further guidance shortly.”
Earlier today, the European Court of Justice (ECJ) ruled Deutsche Bank was not exempt from charging VAT on its services, in a battle between the bank and Finanzamt Frankfurt am Main, the tax office in Germany.
But financial experts have warned the ruling will lead to increased expenses line for UK consumers.
Andrew Morris, managing director at Rowan Dartington’s discretionary arm Signature, said the ruling was “not good news” for the consumer.
“It’s obviously a blow to us but the people who are going to be affected most are the consumers who are going to end up paying more for their services,” he said.
Mr Morris said the impact of the ruling on the UK market hinged on what guidance was passed on in the country.
“We have to wait to see from the HMRC what guidance is going to be passed on,” he said.
Lorraine Parkin, head of indirect tax at accountancy giant Grant Thornton, said the judgment flew in the face of a trend to widen exemptions for fund management, pointing to recent exemptions for investment trusts and pensions.
“The underlying result of this is that it will be more costly for people incurring the fund management,” she said.
“Companies will be seeking to pass that on and they will have to charge VAT to consumers.”
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