The National Association of Pension Funds’ attempt to save defined-benefit pension schemes around £100m a year in VAT could be scuppered after the European Commission opposed the move.
The NAPF and Wheels Common Investment Fund Trustees, the Ford pension fund, launched the case in 2008 following an ECJ ruling which found that investment trusts should be exempt from VAT on investment management services.
At the hearing at the ECJ last week, the European Commission said it agreed with HMRC’s arguments that workplace schemes are not exempt as they are restricted to employees and the benefits are guaranteed. HMRC and the EC also argued contributions are not investments but payments in exchange for future rights to specific retirement payments and contributions cannot be withdrawn.
Grant Thornton UK director of indirect taxes Stuart Brodie says: “We did not know up until the hearing last week that the European Commission was against it. Now we know this is the case it looks less hopeful than a few years ago when the case was launched.”
An opinion statement on the case is expected in the next few months followed by a final ruling.