EUROPE: Abbey VAT Case – Advocate General`s opinion

Thursday September 8 2005

On 8th September, the Advocate General to the European Court of Justice’s (ECJ) delivered her opinion in the case of Abbey National plc and Inscape v Commissioners of Customs and Excise. Whilst the Advocate General’s opinion is not binding on the ECJ, the Court reaches the same conclusion in about 80% of cases. If the Court’s decision does follow the Advocate General’s opinion then the scope of the current UK VAT exemption in the fund management industry will increase and therefore there should be an overall reduction in costs for funds.

For Abbey alone, the VAT charged by its providers on administration and depositary services for unit trusts and ICVS amounted to £101 million. The Court’s decision will, of course, ultimately impact on other jurisdictions also, not just the UK and could have a significant effect on how Manager’s structure their outsourcing arrangements. A final ruling is expected within the next six months.