Management fees on venture capital trusts and investment trusts will be exempt from VAT, Alistair Darling’s Budget has confirmed.

The changes for VCT will come into force from 1 October. The move follows the European Court of Justice’s ruling last year that the VAT charged on investment trust management fees was unlawful.

Daniel Godfrey, director general of the Association of Investment Companies, said: “We are delighted that the government has today the VAT exemption on management fees to VCTs. This is a very welcome boost to the industry and VCT investors who will benefit from this cost saving over the long-term.”

Godfrey added that the move would enable investment trusts to invest tax-efficiently in a wider range of asset classes, improving competition in the market.

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• Budget 2008