The recent case of JIB Group Limited v The Commissioners for Her Majesty's Revenue & Customs [2012] UKFTT 547 (TC) has confirmed the position regarding input and output VAT for independent trustees. The case concerned Independent Trustee Services Limited ("ITSL"), a professional trustee company. ITSL instructed third party professional advisers to provide advice in relation to various pension schemes ("the Advisers"). The Advisers' fees were paid directly from the Schemes' funds. The question was whether ITSL was entitled to recover VAT charged by the Advisers instructed by ITSL in its capacity as an independent trustee of the pension schemes, and the wider issue was therefore whether VAT incurred on third party costs can be recovered by statutorily independent trustees. The Tribunal was also asked to give an opinion on whether, in principle, ITSL would have any liability to account for an amount of output tax.
The Tribunal held that ITSL is a taxable person, that it was liable to pay the Advisers' fees, and that the Advisers' services were supplied to ITSL for the purposes of providing independent professional trustee services. ITSL was therefore entitled to deduct the VAT charged by the Advisers, in so far as the Advisers' services were used for the purposes of its taxed transactions.
However, on the output tax question, the tribunal found that ITSL must account for the VAT on the amounts paid by the Schemes in relation to the Advisers' fees. This will mean that most independent trustees are placed in a VAT-neutral position, and consequently as the Tribunal stated, the ability to reclaim input tax is rendered a somewhat Pyrrhic victory.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
