European Court of Justice backs AIC and JP Morgan Claverhouse

The European Court of Justice (ECJ) today found in favour of the Association of Investment Companies (AIC) and JPMorgan Claverhouse Investment Trust plc in declaring that the management expenses of investment trusts should be exempt from VAT in the same way as unit trusts and OEICs.

Sir Michael Bunbury, Chairman of JPMorgan Claverhouse Investment Trust plc, said: “We are delighted that the ECJ has found in our favour. This case was started in 2004, but the result has been worth the wait. JP Morgan Claverhouse suffered £460,000 in irrecoverable VAT last year. In future, this money, together with refunds relating to earlier years, should be available for shareholders. The benefit will compound into the future and further enhance shareholder value.”

Daniel Godfrey, Director General of the AIC, said: “VAT has been unfairly charged on the management expenses of investment trusts since 1990, to the detriment of their shareholders. We have been trying to persuade the Government that it was unfair to give an exemption to unit trusts and OEICS, but not investment trusts, for nearly ten years and so we are very pleased, but not surprised, by this result.

“We now call on the Government to move quickly to start refunding the money that has been taken wrongly from our Member Companies since 1990 and to change the law to reflect the ECJ judgement.”

The AIC estimates that the judgement will save the investment trust industry around £40 million a year in VAT on an ongoing basis and that the amount of VAT to be refunded in respect of past payments could be as high as £300 million.