We understand that HMRC will not be extending VAT exemptions generally to schemes in windup
despite the outcome of the Capital Cranfield Trustees case earlier this year, on the grounds
that that was a tribunal decision with no precedent status, though HMRC ”will consider whether
any policy changes are necessary”. As things stand individual tribunal cases will have to be
considered where appropriate.

Capital Cranfield was a professional trustee providing professional advice to pension fund
trustees and acting as a pension fund trustee itself. In both capacities it was liable to pay VAT
when it obtained advice from other professional advisers. It was not in dispute that where it
acted as professional adviser it could offset VAT tax against the fees it charged. The tribunal
decided that it could do so also where acting as trustee. A professional trustee's activities as
adviser and as trustee are not "separate and distinct" but a composite service involving the
services of third party professionals.

This is a separate issue from that in the Morgan Fleming case last year, where the ECJ decided
that fund management services supplied to investment trust companies are exempt from VAT.
As reported in the May 2008 Pensions update, the NAPF and the Wheels Common Investment
Fund are bringing a similar case to the UK VAT & Duties Tribunal in relation to pension
schemes.