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Help with VAT on fund management services — GfC20

Published 10 September 2026

Purpose and scope

These guidelines:

• are for businesses providing or receiving fund management services, including outsourced fund management services
• explain HMRC’s recommended approach to deciding whether these services are single or multiple supplies

Background

Funds are usually managed by a fund manager, who supplies fund management services to the fund. Fund management services include both investment management activities and the administration of the fund. A fund manager may outsource some or all of those services which would otherwise be performed in‑house. Outsourced services are supplies normally made by the third party to the fund manager.

The VAT liability of a supply of services by a third party to a fund manager depends on the nature of the services supplied. A supply does not become exempt simply because the fund manager uses it in making exempt supplies.

The exemption for the management of certain funds is set out in Items 9 and 10 of Group 5, Schedule 9 to the Value Added Tax Act 1994.

For a supply of services by a third party to a fund manager to be exempt:

• the fund must be a qualifying fund within the meaning of Items 9 or 10
• the services must, viewed broadly, form a distinct whole and be specific to, and essential for, the management of that qualifying fund

Supplies which are merely physical or technical in nature do not qualify for exemption.

Read more detail on the VAT exemption and meaning of qualifying funds.

Outsourced services in relation to the VAT exemption

Where fund managers outsource some or all of the management services to a third party which they would otherwise perform in-house, they commonly enter into Master Services Agreements (MSAs), or similar overarching contracts. This provides a high-level framework for the commercial relationship with the third-party service provider. These contracts are often supported by more detailed documentation or information which sets out the services and fees in relation to individual funds, sub-funds or share classes.

When determining whether these relationships represent a single supply or multiple supplies of management services from the third party supplier to the fund manager, the key consideration is whether, taken together, the management services provided under the MSA form a single indivisible supply which it would be artificial to split. The ‘ancillary’ principle (explained later in these guidelines) is not generally relevant.

The basic position is that the correct VAT treatment will depend on the commercial and economic reality and not simply the contractual structure. It is well established that there is no single factor that determines whether or not there is a single or multiple supply. The indicators set out in these guidelines need to be considered in the context of the facts in question.

Recommended approach

Each supply of services should be identified before deciding whether that supply meets the conditions for exemption. The principles that determine whether there is a single or multiple supply apply across the VAT system. Whether any particular arrangement should be characterised as a single or multiple supply will depend on the facts of that case and on a range of factors, including the contractual position. It should be noted that the existence of a single contract is not by itself determinative. Read more about why it is important to distinguish between single and multiple supplies.

In relation to fund management a single supply of fund management services has a single VAT liability. As such a single supply cannot have different VAT rates that are apportioned in accordance with the extent to which the supply is used for qualifying and non-qualifying funds. The VAT liability of the supply cannot be based on whether the majority of the funds are qualifying or non-qualifying. The supply must be made solely in respect of qualifying funds to be an exempt supply.

It should be noted that there are no bespoke single and multiple supply rules or policies that apply to fund management. The normal rules apply, but these guidelines aim to help businesses understand how to apply the rules to particular commercial relationships.

Single and multiple supply principles

These guidelines summarise HMRC’s approach to single and multiple supplies. For more detail you should read HMRC internal manual VAT Supply and Consideration.

It will normally be clear that a single supply is being made where the supply consists of a single element. Where a supply includes more than one element, the general principle is that elements which are distinct and independent constitute separate supplies for VAT purposes, each with its own VAT liability.

However, where the elements are combined in such a way that, from an economic point of view, they constitute a single supply, that supply should not be artificially split.

A transaction consisting of several elements will be treated as a single supply for VAT purposes where:

• one or more elements are ancillary to a principal supply, in that they are not an aim in themselves but are a means of better enjoying the principal supply (Card Protection Plan Ltd v CEC, Case C-349/96)
• two or more elements are so closely linked that, from an objective point of view, they form a single, indivisible supply which it would be artificial to split (Levob Verzekeringen BV v Staatssecretaris van Financiën, Case C-41/04)

Where a transaction consists of more than one element, there is likely to be a single supply in the majority of situations. This is because most elements of a transaction are either ancillary to a dominant element or are working together to create a whole.

Whilst the likelihood of there being a single supply serves as a starting point, businesses should consider the facts against indicators where there are multiple elements. These indicators are not absolute tests or hurdles, but can be used if the two descriptions of a single supply do not immediately give an answer. If one or more indicators are present then there are likely to be multiple supplies, and if none are present then the likelihood is that there is a single supply.

The indicators are:

• there is more than one supplier
• the view of a typical consumer is that they are buying two or more distinct and independent supplies
• the terms of the contract and economic reality indicate more than one supply
• the intention of the legislation, such that the arrangement does not extend the scope of a relief or exemption

There is no single decisive indicator, but a significant feature common to all cases is whether it would be artificial either to split out elements into multiple supplies or bundle them together into a single supply.

All four indicators should be considered in all cases. The individual circumstances will dictate which of them will be of the most importance. They are not listed in order of importance and whether an indicator will be relevant will depend upon the precise circumstances of the transaction.

Application of the indicators

These indicators explain when HMRC is likely to conclude that a supply points towards either a single supply or multiple supplies of fund management services for VAT purposes.

This is not an exhaustive list. Each case must be considered on its own facts and circumstances.

Number of suppliers

Supplies made by two separate legal entities cannot normally be treated as a single supply. This position will normally only change where there is evidence of abuse or sham arrangements.

View of the typical consumer

In assessing whether there is a single or multiple supply, HMRC considers how a typical consumer would view the transaction. In this context, the typical consumer is the fund manager, or another recipient of the services.

	Indicators of multiple supplies	Indicators of a single supply
Customer aim	There is a separate aim and separate or bespoke decision‑making for each fund on whether to obtain any (and which) services from the supplier.	The aim is to obtain a standardised service for all funds together as a single package, without considering the specific requirements of individual funds. The services are commissioned by the customer (for example, the fund manager) without separate or bespoke decision‑making for each fund on whether to obtain any (and which) services from the supplier.
Dependency	The recipient can still carry on its business if it receives some, but not all, elements of the service from the supplier. For example: • a service supplied in relation to one fund does not support delivery of the service in relation to any other fund • the recipient does, or could, source the same services from a different supplier Commonality between activities does not undermine this indicator where the same activity is performed for more than one fund (for example, valuing the same assets), but the output is different for each fund. For example, each fund has a different Net Asset Value (NAV) because each fund holds a bespoke mix of assets.	Receiving all elements of the service together from the same supplier, for all funds, is necessary for the recipient to carry on its business. For example, the recipient cannot operate unless the service is delivered by the same supplier in respect of all funds.

Contract terms and economic reality

Whether there is a single or multiple supply depends on the full range of indicators, including the contractual position.

A single contract alone is not determinative. While the contract should be the starting point, it may not reflect the economic reality of how the services are supplied.

Where a business considers that an overarching contract or framework does not reflect the economic reality, it should provide when required:

• evidence that the contract has been varied
• alternative evidence demonstrating what the economic reality is

HMRC will accept that this test is met where the relevant single or multiple supply indicators are satisfied.

	Indicators of multiple supplies	Indicators of a single supply
Customer aim	There is a separate aim and separate or bespoke decision‑making for each fund on whether to obtain any (and which) services from the supplier.	The aim is to obtain a service for all funds together as a single package.
Documentation	Documentation or separate agreements exist under a Master Services Agreement showing services tailored to specific funds. The services are tailored by the supplier to meet the specific requirements of each fund. The delivery of the service is different or distinct for different funds or types of fund. Having the same service label does not undermine this indicator. For example, each fund receiving NAV services does not, by itself, indicate a single supply. What matters is whether the output of the service is bespoke to each fund, such as each fund having its own NAV due to its individual asset mix.	There is no documentation below the Master Services Agreement indicating that services are tailored to individual funds. The services provided are generic, or effectively the same, for each fund without distinction. The delivery of the service is the same for different funds or types of fund.
Delivery	The delivery of a service element for one fund does not support delivery of the same element for any other fund.	Delivery of a service element for one fund supports delivery of the same element for other funds.
Pricing	A separate price is paid for each fund. For example: • prices calculated on a ‘bottom‑up’ basis based on the services provided to that fund • pricing linked to the size of the fund (such as assets under management) or other fund‑specific characteristics Invoices issued to the customer (for example, the investment manager) identify fees separately for each fund.	A single price is paid for the package of services, or costs are apportioned, rather than calculated on a ‘bottom‑up’ basis by reference to individual funds.

Intention of the legislation

These rules must not be used to extend the VAT exemption beyond what the law allows.

In ‘BlackRock Investment Management (UK) Ltd v Revenue and Customs Commissioners (Case C‑231/19)’, the ruling confirmed that a single supply of fund management services has a single VAT liability. Where a single supply of fund management is provided to multiple funds, this supply cannot be split so that different VAT rates apply according to how the services are used for qualifying and non‑qualifying funds.

The VAT liability of the supply cannot be determined by reference to whether most of the funds are qualifying or non‑qualifying. For the supply to be exempt, it must be made solely in respect of qualifying funds.

Next steps

Businesses providing fund management services, including outsourced fund management services, can use these guidelines to help decide if their service is a single or multiple supply. They can then apply the appropriate rules around the VAT exemption on fund management services.

What to do if you’ve made a mistake

To correct a submitted VAT return, you’ll need to read the section correcting VAT errors on a return already submitted in How to correct VAT errors and make adjustments or claims (VAT Notice 700/45).

When correcting a VAT return because of the information in these guidelines, you should enter the reference number ‘GfC20’ in the reason for error box.

Where customers fail to meet their obligations, they may be subject to any or all of the following:

• penalties
• interest

If you think you may have failed to meet your obligations, read the HMRC compliance checks factsheets on penalties to find out about:

• penalties HMRC could use
• when these penalties may apply

Further questions

If you have any further questions after reading these Guidelines for Compliance you can contact us by email: ccgguidelinesforcompliance@hmrc.gov.uk.

You should include the Guidelines for Compliance reference number ‘GfC20’ in the subject line. If you have a Customer Compliance Manager (CCM) you should copy them into the email.

Sending information by email carries certain risks. HMRC will assume that by sending information by email you understand and accept these risks.

Legislation and guidance

The legislation for the exemption for the management of certain funds is set out at Items 9 and 10, Group 5, Schedule 9, Value Added Tax Act 1994.

The VAT guidance on the exemption for the management of certain funds is in:

• VAT Finance manual
• VAT Notice 701/49: finance