- June 26, 2015
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
In a case of significance to charities and the investment community, the University of Cambridge has won the right to reclaim a substantial proportion of the VAT it paid to fund managers who oversaw the deployment of its £1 billion investment portfolio.
Although the university is a charity and its provision of education is exempt from VAT, it also makes certain taxable supplies, including commercial research and sale of publications. Its investment activity is not viewed as an economic activity in its own right and the transactions of the fund fall outside the scope of VAT.
However, VAT was charged by the fund managers on their fees and the university sought to deduct a proportion of the tax paid over two periods, totalling more than 25 years. The rebate claim was resisted by HM Revenue and Customs (HMRC) but the university’s arguments prevailed before the First-tier Tribunal.
In dismissing HMRC’s appeal, the Upper Tribunal noted that the university’s portfolio generated an annual income of more than £40 million which it used to support all its activities, including those which were subject to VAT. The fund managers’ fees were correctly viewed as part of the overheads of the university’s economic activity in general.