Splitting a single supply of management services into VAT exempt and taxable services
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Splitting a single supply of management services into VAT exempt and taxable services
Splitting a single supply of management services into VAT exempt and taxable services
Wed 16 Jan 2019
In the case of Blackrock Investment Management (UK) Ltd (Blackrock), the Upper Tribunal (UT) has agreed with the First tier Tribunal (FTT) that the ‘Aladdin platform management services’ provided to it by its US group company could be regarded as management services potentially qualifying for VAT exemption when supplied to special investment funds (SIFs). However while the FTT had previously considered that as the services were a single supply used mostly for investment funds not qualifying as SIFs, the whole supply should be standard rated, the UT was unable to conclude on this issue (The TTH summary of the FTT decision can be found here).
As a result the UT has decided to seek guidance from the CJEU as to whether a single supply of management services for both SIF and non-SIF funds can be apportioned between exempt and taxable amounts.
Implications
Should apportionment be possible, then this would be beneficial for Blackrock. VAT on the services received would be accounted for under the reverse charge procedure with:
- output VAT due on portion of services for non-SIF funds matched under the reverse charge procedure by input VAT which, would be fully recoverable as a result of an onward taxable supply being made; and
- the portion of services for SIF funds would fall within the exemption, resulting in no VAT due under the reverse charge procedure.
Alternatively, if the supply of services could not be apportioned:
- there would be output VAT on the full value of the services supplied to Blackrock’s UK group, with matching input VAT under the reverse charge procedure, only recoverable as overhead input VAT according to its partial exemption method.
The outcome of this case will be of interest to groups using cross border intragroup services in the financial sector. For a further discussion of cross border VAT issues for intragroup services in the financial service sector, please get in touch with a member of the Mazars indirect tax team.
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