Pension fund VAT exemption

VAT exemption for the management of defined contribution (DC) pension schemes has moved a step closer, following the opinion of the Advocate General (AG) in ATP PensionService A/S (case C-464/12).

ATP is the latest case to be referred to the Court of Justice of the European Union (CJEU) on the VAT exemption for fund management services. Essentially, the question in ATP is whether DC pension schemes are sufficiently similar to other funds which already benefit from the VAT exemption. If they are, the principle of ‘fiscal neutrality’ dictates that DC pension schemes must also benefit from the VAT exemption for fund management services, in order to maintain a level playing field.

The AG’s opinion, published on 12 December 2013, suggests that HMRC’s current policy requiring managers to charge standard rate VAT to DC pension schemes is wrong and that VAT exemption should be allowed. However, the AG’s opinion is only a preliminary answer to the questions in ATP and we therefore have to wait for the CJEU’s judgment. If the judgment follows the AG’s opinion, DC pension schemes could be entitled to a refund of VAT overpaid on management services.

DC pension schemes that have incurred irrecoverable VAT on management services should ask their suppliers to submit protective claims to HMRC as soon as possible, if they have not already done so.  This is because claims can only be submitted for VAT incurred in the past four years.  As the final outcome in this matter could still be some months (or even years) away, protective claims submitted now should prevent current claim periods falling out of time.

Insurance-based DC pension schemes already benefit from a VAT exemption for management services and should, therefore, be unaffected by the outcome in ATP.

For advice on this matter, or assistance with submitting a protective claim, please contact Robert Facer in our VAT team.


Robert Facer

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