The National Association of Pension Funds (NAPF) and the Wheels Common Investment Fund (WCIF) have lost their case against UK HM Revenue & Customs (HMRC), in which they argue that pension funds should be exempt from paying VAT.
The Court of Justice of the European Union (CJEU) ruled that UK workplace defined benefit (DB) pension funds are not special investment funds and therefore not exempt from paying VAT on investment management services.
For Joanne Segars, chief executive at the NAPF, the judgement was "deeply disappointing". "Pension funds were set up to be vehicles that are free from tax, and they should not be paying these VAT charges", she said. "The European Commission is currently reviewing the VAT Directive, and we will be making strong representations as to why the management of pension funds should be VAT exempt under the proposed change to the current VAT regime."
A number of pension experts have called on Brussels to clarify what is considered a 'special investment fund'. HMRC said it is pleased that the judgement supports their current policy on the application of the investment fund management VAT exemption.
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