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HMRC internal manual

VAT Finance Manual

Management of investments, portfolios, funds, ‘wrapper’ products and related services: VAT exemption for the management of open-ended collective investment schemes: umbrellas and sub-funds

Many larger CIU are ‘umbrellas’ whereby the assets are separated into distinct ‘sub-funds’. It is important to note that, for the purposes of the legislation, each sub-fund of an umbrella is defined separately. By way of example, a SICAV (similar to an OEIC) established in Luxembourg is an umbrella scheme with, say, 30 sub-funds. If shares in 5 of the sub-funds are to be marketed to UK retail investors, notification must be given to the FSA. Amongst other things, this notice must contain the name of the SICAV and of each of the sub-funds to be marketed. In this case, only the 5 sub-funds are recognised overseas collective investment schemes for the purposes of the VAT exemption. Recognised overseas schemes (including details of the relevant sub-funds) are included in the FSA register, accessible via their website at .

However, in practice, it may be that all the sub-funds have been included in the notice to the FSA even if they are not, and there is no intention that they will be, marketed to UK retail investors. The aim of the law is to capture only those sub-funds in which units are, or have been, actively marketed to UK retail investors and so the FSA register is not necessarily definitive in identifying them.

It should also be stressed that in the case of an umbrella containing sub-funds (or similarly with a CIU structured as a protected cell company with each cell equivalent to a sub-fund), the exemption applies to the management of the sub-fund or cell. EU law requires the fund to be defined and does not permit us to break this down further - for example to exempt the management only to the extent that shares are held by UK retail investors.