The National Association of Pension Funds is mounting a legal challenge against HM Revenue & Customs in the European Court of Justice to challenge whether defined-benefit pension funds should be charged VAT on investment management services.
DB pension funds pay an estimated £100m a year in VAT. The NAPF, together with Ford’s UK pension scheme Wheels Common Investment Fund, is contesting the VAT liability.
Investment management services provided through pooled funds and insurance wrappers are already VAT exempt, meaning defined contribution schemes do not usually pay VAT on investment management services, however defined benefit schemes do.
The case was launched in 2008 following an ECJ ruling involving the JP Morgan Fleming Claverhouse Investment Trust. The court ruled that investment trusts were special investment funds and so should be exempt from VA on investment management services.
In February, a tribunal hearing was held in London which decided the ECJ should define the wider implications of that exemption, and what that means for DB funds.
Since then the tribunal, the NAPF and Wheels have been working on the factual outline of the case and the questions which will form the basis of the ECJ’s interpretation of European Union law.
The case was formally referred to the ECJ in August.
NAPF chief executive Joanne Segars says: “We are pleased the case is going to the ECJ and we feel we have a strong case.
“Pension funds should consider working with their investment managers to ensure that any overpaid VAT on investment management services will be protected.”