Consultation on the VAT treatment of fund management services

The rules for the VAT treatment of fund management fees are unclear and incentivise UK fund managers to establish non-UK funds or add complexity to their arrangements. The proposals in the government’s long awaited consultation document do not intend radical reform. Instead, they aim to give more legislative clarity to the fund types to which the fund management exemption applies, by codifying the government’s view of the current EU law position. This lack of ambition may reflect the fact that there is no obvious straightforward, politically acceptable solution. However, the consultation appears to leave the door open for creative ideas.