11 March 2013
Press ReleasesJudges in Luxembourg have this week (7 March 2013) ruled that UK workplace defined pension funds are not special investment funds and therefore not exempt from paying VAT on investment management services.
The Court of Justice of the European Union (CJEU) decision in Wheels Common Investment Fund Trustees Ltd (“Wheels”) is a major blow for occupational pensions schemes.
Wheels has an occupational pension scheme into which both individuals and employers make regular contributions. The pooled assets of a number of these types of schemes are managed by fund managers.
Ruth Corkin, Head of VAT Services at accountants and business advisers James Cowper Kreston explained: “Wheels, supported by the National Association of Pension Funds (NAPF), has been arguing since 2008 that its occupational pension scheme should be treated as a special investment fund for VAT purposes to bring them in line with a decision on investment trusts taken that year. The judges disagreed and decided that the fees charged to the various schemes by the fund managers should be subject to VAT.”
The NAPF has expressed its disappointment with the decision saying that pension funds were set up to be free of tax, adding that it will be taking the matter up with the European Commission through its review of the VAT Directive.
Ruth added: “The Treasury will no doubt be delighted with the CJEU’s decision. Had the judgment gone the other way it would have been possible for schemes to make backdated claims totaling in the region of an eye-watering £2 billion, via the fund managers, to recoup the VAT previously charged by them. It’s possible that the pendulum could still swing the other way, and it will be interesting to see what, if any, impact the NAPF’s representations have.”
Ruth Corkin, Head of VAT Services, James Cowper Kreston LLP, Tel +44 (0)1865 861166 or email
