Monckton Chambers has scored a European Court of Justice (ECJ) victory that will see investment trusts collectively receive a £300m tax refund in addition to making annual savings of £40m.
The ECJ ruled that investment trusts such as JPMorgan Claverhouse, which brought the proceedings, should be exempt from VAT on management expenses.
The investment vehicle claimed that closed-ended investment funds, including investment trusts and venture capital trusts (VCTs), should qualify for the same VAT exemption as their open-ended counterparts such as unit trusts and open-ended investment companies.
The ECJ ruled that discrimination against closed-ended products does not appear justified and that the VAT exemption must also apply to investment trust companies because they are comparable to open-ended structures.
The Association of Investment Companies (AIC), which brought the proceedings jointly, said the decision followed years of arguing for parity of VAT treatment with other collective investment schemes.
AIC director general Daniel Godfrey said: "VAT has been unfairly charged on the management expenses of investment trusts since 1990 to the detriment of shareholders."
The AIC estimates that the judgment will save the investment trust industry around £40m a year in VAT and that refunds for past payments could be as high as £300m.
Sir Michael Bunbury, chairman of JPMorgan Claverhouse, said the vehicle paid £460,000 in irrecoverable VAT last year.
He added: "In the future, this money, together with refunds relating to earlier years, should be available for shareholders."
Paul Lasok QC of Monckton was lead counsel for JPMorgan Claverhouse, instructed by Deloitte director Anbreen Khan. The UK, acting for HM Revenue & Customs, was represented by Raymond Hill, also of Monckton, and was instructed by the Treasury Solicitor.