The recent judgment in the Abbey National case at the European Court of Justice (ECJ) will result in a more level playing field for private investors across the EU by making VAT treatment consistent for unit trusts and open-ended investment companies (OEICs), according to business and financial advisers Grant Thornton.

The case considered the scope of the VAT definition for the "management of special investment funds."

Previously, OEICs were charged VAT at standard rate by managers while unit trusts were not. The Court rejected this distinction and expanded the class of management activities that will now have to be exempt from VAT in the UK. The UK argued that only investment management services could qualify for VAT exemption.

The Court held that most administration services that are essential to fund management will qualify. Mere support services such as IT will not be exempt.