Pension bodies challenge HMRC on VAT

by Gill Montia

Story link: Pension bodies challenge HMRC on VAT

The National Association of Pension Funds (NAPF) has joined forces with Wheels Common Investment Fund (WCIF), which manages private pension schemes for Ford, Jaguar and Land Rover to mount a legal challenge over VAT.

HM Revenue & Customs (HMRC) currently collects VAT on the investment management services supplied to occupational pension funds and WCIF and NAPF will argue that this is contrary to European tax law.

If the case is successful, the UK pension funds sector could receive up to £300 million in VAT rebates, covering the past three years.

In addition, pension funds would no longer have to pay an estimated £100 million in VAT annually.

Last year, JP Morgan brought a successful case on behalf of the investment trust industry, which resulted in collective investment schemes becoming exempt from VAT.

A successful ruling on this occasion would benefit members of defined benefit pension schemes with segregated investments the majority of defined contribution schemes are already exempted from paying VAT on management fees.

KPMG is advising the petitioners and the case will initially be presented to the UK VAT & Duties Tribunal.

Should it be referred to the European Court of Justice, it could take three years to settle the matter.