Abbey National plc and Inscape Investment Fund v Commissioners of Customs & Excise.
Date: 2006-05-04
26. Towards the end of 2000, Inscape Investments Limited entered into an agreement on Inscape Investment Fund’s accounting with Bank of New York Europe Limited and, subsequently, with Bank of New York (‘Bank of New York’). Under that agreement, Bank of New York undertook to perform a raft of services delegated by Inscape Investments Limited, in particular computing the amount of income and the price of units or shares, the valuation of assets, accounting, the preparation of statements for the distribution of income, the provision of information and documentation for periodic accounts and tax, statistical and VAT returns, and the preparation of income forecasts.
38. According to settled case-law, the exemptions provided for in Article 13 of the Sixth Directive have their own independent meaning in Community law which must be given a Community definition whose purpose is to avoid divergences in the application of the VAT system from one Member State to another (see, particularly, Case C-358/97 Commission  v Ireland  [2000] ECR I-6301, paragraph 51; Case C‑428/02 Fonden Marselisborg Lystbådehavn  [2005] ECR I-1527, paragraph 27; and Joined Cases C‑394/04 and C-395/04 Ygeia [2005] ECR I‑0000, paragraph 15).
39. While, consequently, the Member States may not alter their content, in particular in laying down conditions of application, that cannot however be so where the Council has specifically conferred on them the task of defining certain terms of an exemption (see Case C-468/93 Gemeente Emmen [1996] ECR I-1721, paragraph 25).
40. It is therefore appropriate to consider whether Article 13B(d)(6) of the Sixth Directive confers on the Member States the task of defining both the meaning of ‘special investment funds’ and that of ‘management’ of those funds or whether it covers only the first of those two concepts.
41. In that regard, it must be stated that while the English and Dutch versions of that provision are ambiguous as to its scope, it is clear, particularly from the Danish, German, French and Italian versions, that Article 13B(d)(6) of the Sixth Directive refers to the Member States’ definitions only as regards the meaning of ‘special investment funds’.
43. Therefore, the reply to the first question must be that the concept of ‘management’ of special investment funds in Article 13B(d)(6) of the Sixth Directive has its own independent meaning in Community law whose content the Member States may not alter.
The second and third questions
53. It must be noted, at the outset, that Article 13B(d)(6) of the Sixth Directive covers special investment funds whatever their legal form. Undertakings for collective investment constituted under the law of contract or trust law, and those constituted under statute both come within the scope of that provision.
54. Neither the context nor the wording of Article 13B(d)(6) of the Sixth Directive indicates that the legislature intended to limit the application of that provision only to undertakings for collective investment constituted under the law of contract or under trust law.
55. In fact, when the Sixth Directive was adopted, the Community terminology in this field was not yet harmonised, since Directive 85/611, Article 1(3) of which gives a Community definition of UCITS, was adopted only in 1985. In addition, while the French and Italian versions of Article 1(3) of Directive 85/611, when they designate undertakings for collective investment constituted under the law of contract, use the same expression as that which appears in Article 13B(d)(6) of the Sixth Directive, such is not the case in other language versions of that provision, particularly the English, German, Danish and Dutch versions.
56. Moreover, as regards the application of Article 13B(d)(6) of the Sixth Directive to transactions effected between undertakings for collective investment and their participants, any other interpretation of that provision, exempting from VAT the management of undertakings for collective investment constituted under the law of contract or under trust law, and not those constituted under statute, would be contrary to the principle of fiscal neutrality on which, in particular, the common system of VAT established by the Sixth Directive is based, and which precludes economic operators carrying out the same transactions being treated differently in relation to the levying of VAT (see Case C-382/02 Cimber Air [2004] ECR I‑8379, paragraphs 23 and 24, and Case C‑280/04 Jyske Finans  [2005] ECR I‑0000, paragraph 39).
59. That provision must therefore be interpreted in the light of the context in which it is used and of the aims and scheme of that directive, having particular regard to the underlying purpose of the exemption which it establishes (see, to that effect, Case C-284/03 Temco Europe  [2004] ECR I-11237, paragraph 18, and Fonden Marselisborg Lystbådehavn , paragraph 28).
60. First of all, it must be borne in mind that, since the exemptions referred to in Article 13 of the Sixth Directive are exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person, they should be interpreted strictly (see, in particular, Case C-275/01 Sinclair Collis  [2003] ECR I-5965, paragraph 23, and Case C-8/01 Taksatorringen  [2003] ECR I-13711, paragraph 36).
61. Next, it follows from Article 1(2) of Directive 85/611 that the transactions carried out by UCITS consist in the collective investment in transferable securities of capital raised from the public. With the capital provided by subscribers when they purchase shares, UCITS assemble and manage, on behalf of the subscribers and for a fee, portfolios consisting of transferable securities (see Case C-8/03 BBL  [2004] ECR I-10157, paragraph 42).
62. As the Advocate General observed in point 68 of her Opinion, the purpose of the exemption, under Article 13B(d)(6) of the Sixth Directive, of transactions connected with the management of special investment funds is, particularly, to facilitate investment in securities for small investors by means of investment undertakings. Point 6 of that provision is intended to ensure that the common system of VAT is fiscally neutral as regards the choice between direct investment in securities and investment through undertakings for collective investment.
63. It follows that the transactions covered by that exemption are those which are specific to the business of undertakings for collective investment.
64. Therefore, apart from tasks of portfolio management, those of administering undertakings for collective investment themselves, such as those set out in Annex II to Directive 85/611, as amended, under the heading ‘Administration’, which are functions specific to undertakings for collective investment, come within the scope of Article 13B(d)(6) of the Sixth Directive.
65. On the other hand, that provision does not cover the functions of depositary of undertakings for collective investment, such as those set out in Articles 7(1) and (3) and 14(1) and (3) of Directive 85/611. Those functions do not fall under the management of undertakings for collective investment but under the control and supervision of their activities, the aim being to ensure that undertakings for collective investment are managed in accordance with the law.
66. As regards the services performed by a third-party manager in respect of the administrative management of the funds, it should be noted first that, like the transactions exempted under points 3 and 5 of Article 13B(d) of the Sixth Directive (see Case C-2/95 SDC  [1997] ECR I-3017, paragraph 32), the management of special investment funds referred to in point 6 of that article is defined according to the nature of the services provided and not according to the person supplying or receiving the services.
67. Next, the wording of Article 13B(d)(6) of the Sixth Directive does not in principle preclude the management of special investment funds from being broken down into a number of separate services which may come within the meaning of ‘management of special investment funds’ in that provision, and which may benefit from the exemption under it, even where they are provided by a third-party manager (see, to that effect, as regards Article 13B(d)(3) of the Sixth Directive, SDC , paragraph 64, and, as regards Article 13B(d)(5) of that directive, Case C‑235/00 CSC Financial Services  [2001] ECR I‑10237, paragraph 23).
68. In those circumstances, it follows from the principle of fiscal neutrality that operators must be able to choose the form of organisation which, from the strictly commercial point of view, best suits them, without running the risk of having their operations excluded from the exemption under Article 13B(d)(6) of the Sixth Directive.
69. It follows that management services performed by a third-party manager come, generally, within the scope of Article 13B(d)(6) of the Sixth Directive.
70. However, to be regarded as exempt transactions for the purposes of Article 13B(d)(6) of the Sixth Directive, services performed by a third-party manager in respect of the administrative management of the funds must, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of a service described in that same point 6 (see, to that effect, as regards Article 13B(d)(5) of the Sixth Directive, SDC,  paragraph 66, and CSC Financial Services , paragraph 25).
71. The services supplied must therefore concern specific essential elements of the management of special investment funds. Mere material or technical supplies, such as the making available of a system of information technology, are not covered by Article 13B(d)(6) of the Sixth Directive (see, to that effect, as regards Article 13B(d)(3), SDC , paragraph 66).
72. Therefore, it must be held that Article 13B(d)(6) of the Sixth Directive is to be interpreted as meaning that the services performed by a third-party manager in respect of the administrative management of the funds come within the concept of ‘management of special investment funds’ in that provision if, viewed broadly, they form a distinct whole, and are specific to, and essential for, the management of special investment funds.