Investment management platform ruled as VAT exempt

The decision of the First-tier Tribunal (FtT) in Blackrock Investment Management (UK) Ltd ruled that the provision of a platform for the management of a Special Investment Fund (SIF) could be exempt from VAT.

In this case, Blackrock managed a number of investment funds (both SIFs and non-SIFs) using an investment management platform known as 'Aladdin'. The platform services were provided by an associated US company to Blackrock, and provided the latter with performance and risk analysis, monitoring and improved regulatory compliance, amongst other things.

Blackrock contended that as the platform services were received for the management of both SIFs and non-SIFs, the service should be apportioned with the element related to the management of the SIFS being exempt from VAT and therefore not subject to the reverse charge mechanism. The FtT rejected Blackrock’s argument that the single composite supply of services could be apportioned.

However, with regards to the exemption argument and following the judgements of the CJEU in Abbey National and GfBk, it was decided that the platform services provided to Blackrock, “when viewed broadly, form a distinct whole and are specific to, and essential for, the management of SIFs”. The software was specifically designed and supplied for the purposes of fund management.

Furthermore, the FtT commented that if the services are exempt, this would be consistent with the principle of fiscal neutrality, as Blackrock would not be in a worse position than a fund manager using its own in-house analytical, monitoring and compliance systems.

It was decided that when viewed in isolation, the provision of the software package to Blackrock could be exempt from VAT when used (solely) for the management of a SIF.

Fund managers receiving, or supplying, services in respect of SIFs that are currently treated as being subject to VAT should consider whether those services may in fact qualify for exemption.

If you would like to discuss this further, please contact Shane Risdell or your usual Moore Stephens contact.

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