JHA | Policy on VAT treatment of pension fund management services

HMRC announces change in policy on VAT treatment of pension fund management services

October 31, 2017


With Revenue and Customs Brief 3 (2017) HMRC has announced a change in policy in the treatment of pension fund management services provided by regulated insurance companies. This means that insurers will no longer be allowed to treat their supplies of management services provided in connection with defined benefit pensions (which do not qualify as special investment funds or “SIFS”) as VAT – exempt insurance.

The CJEU found in 2014 that a pension fund which pooled investments from a number of occupational pension schemes qualified as a SIF and could benefit from a VAT exemption for fund management services (see Case C-464/12 ATP PensionService v Skatteministeriet). However, the case dealt with defined contribution pensions and not the VAT treatment of services supplied in connection with defined benefit pensions. According to the CJEU’s 2013 judgment in Case C-424/11 Wheels Common Investment Fund Trustees and Others v Commissioners for Her Majesty’s Revenue and Customs, defined benefit pensions fell outside the fund management exemption for VAT because the investment fund (which pools the assets of the scheme) was not a SIF. Following ATP PensionService, HMRC accepts that management services for funds which qualify as SIFs, with all their required characteristics, were and always have been VAT exempt. Those pension funds that do not have all those characteristics are not SIFs and are not within the scope of the exemption.

HMRC now consider that case law has finally settled in this area and there will be no further review of the EU rules until after Brexit. The new policy on non-SIF pension fund management will apply as of 1 January 2018.


This article appears in the JHA October 2017 Tax Newsletter, which also features:

  1. Littlewoods – Supreme Court Judgment: Statutory Interest Compatible with EU Law by Ibar McCarthy
  2. HMRC v Mercedes Benz Financial Services – CJEU clarifies test on nature of supply of leasing contracts with option to purchase by Katy Howard

You can download the whole newsletter as a PDF: October 2017 – Newsletter