VAT on Investment Management Service - Management of Defined Contribution Pension Schemes can be exempt from VAT

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On 13 March 2014 the ECJ handed down its judgment in the case of ATP v Skatteministeriet.

The case sought to bring the management of defined contribution pension schemes within the VAT exemption for special investment funds (SIF). In brief, ATP provided services to a pension fund administrator including administrative tasks, development of a platform and dealing with payments into and out of the fund. ATP proposed that their services were exempt from VAT being either management of a SIF or transactions concerning deposits, current accounts, payments and transfers. The Dutch authority rejected this claim on the basis that pension funds differ from SIF’s and that the services provided are not covered by an exemption.

The court found in favour of ATP, noting that “the essential characteristic of a SIF is the pooling of assets of several beneficiaries, enabling risk borne by the beneficiaries to be spread over a range of securities”. This means that defined contribution schemes, unlike defined benefit schemes, share enough characteristics with SIFs to receive similar tax treatment. There are conditions which need to be considered in order for the management of defined contribution schemes to be covered by the exemption, mainly the pooled risk that is shared, and each case should be reviewed individually.

HMRC have yet to issue guidance or comment on this judgment and therefore it is not yet entirely clear how the changes will be implemented in the UK but reclaims may be required in order to protect clients. It is now necessary to review the pension funds to which your may provide services and establish whether the VAT liability has changed following this judgment.

Please feel free to get in touch with Kerry Kelly on 0118 921 1332, or your usual Throgmorton contact if you provide services to pension funds or would like to discuss any other VAT related issue.

Kerry Kelly 
20 March 2013

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