A dispute over whether occupational defined benefit pension funds should have to pay VAT on investment management services has been referred to the European Court of Justice (ECJ).
The challenge against HM Revenue & Customs (HMRC) has been jointly brought by the National Association of Pension Funds (NAPF) and Wheels Common Investment Fund (WCIF) together with its underlying Ford schemes.
The action was initiated in 2008 following the JP Morgan Fleming Claverhouse Investment Trust plc ruling in the ECJ which stated that investment trusts were special investment funds and should be exempt from paying VAT on investment management services.
Now a Tribunal hearing held in London between the 10th and 15th of February 2011 has decided that the ECJ should interpret the scope and meaning of that exemption.
The Tribunal and the parties concerned will now work towards formulating questions and an outline of the issues on which the ECJ may provide an interpretation of EU law.
A ruling in favour of the NAPF and WCIF could mean that defined benefit pension funds no longer have to pay an estimated £100m a year in VAT. Backdated claims covering a number of years could be made in the case of some funds.
Joanne Segars, NAPF Chief Executive, said:
"This is an important case and there's a strong argument that defined benefit pension funds should be exempt from paying VAT on investment management services. A successful outcome would benefit pension scheme members by cutting running costs and boosting the funds available for investment."
Notes to Editors:
1. The Wheels Common Investment Fund (WCIF) has £6 billion in assets under management and is a multi-employer scheme which includes a number of Ford Motor Company Limited Pension Funds.
2. The NAPF is the leading voice of workplace pensions in the UK. It speaks for 1,200 pension schemes with some 15 million members and assets of around £800 billion.
3. The issue affects pension funds which have segregated investments managed through asset managers. Investment management services provided through pooled funds and insurance wrappers are already exempt. This means that defined contribution pension schemes will not usually pay VAT on investment management services. Some defined benefit schemes also structure their investments in this way. Local authority funds can generally recover any VAT charged, including that on investment management fees.
Paul Platt, Head of Media, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]