The UK’s £75 billion investment trust industry looks set for a £300 million windfall after Europe’s highest court ruled that HM Revenue & Customs had been unfairly charging VAT on the fund’s management fees.

Although the European Court of Justice insisted the final say on whether the VAT should actually be refunded was down to the UK VAT Tribunal, independent tax experts said it was “inconceivable” that the investment trusts would lose the fight.

Marc Welby, director of VAT at tax advisers Chiltern, said: “Given the strength of this morning’s decision and the very clear guidance it has given, it is inconceivable that the UK Tribunal will not find in favour of the investment trusts.”

The Association of Investment Companies (AIC), a representative group for UK investment trusts that backed today’s case, welcomed the ruling and said its members would now save around £40 million a year in addition to the £300m back tax claim.

HM Revenue said it was “considering the judgment carefully but note that it is for the UK Tribunal to finally decide the case”.

The case, which saw JP Morgan Claverhouse challenge HM Revenue, concerned whether investment trusts should have to pay VAT on management fees while other forms of collective investment vehicle such as unit trusts and OEICS are exempt.

JP Morgan and AIC successfully argued that under European law - which demands “fiscal neutrality” in VAT decisions – it was illegal to exempt one type of fund but not the other.

Following a non-binding opinion from an adviser to the ECJ earlier this year, the court ruled in favour of JP Morgan this morning.

Daniel Godfrey, director general of the AIC, said his members were “looking forward to getting their money back”.

Andrew Loan, a solicitor at Macfarlanes, said: "This case could have far-reaching implications for other forms of investment vehicles - such as pension funds, property funds, limited partnerships and venture capital trusts.

"Many of these investment funds suffer the cost of irrecoverable VAT on the fees that they pay to the external advisers who manage their investments, which reduces the return to their investors. The ECJ's decision suggests that all comparable investment vehicles - whatever their form - should be treated in a similar way."

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