A case brought by the Wheels Common Investment Fund (“Wheels”) and the National Association of Pension Funds (“the Wheels case”) was heard before the First-tier Tax Tribunal from 10 February to 15 February 2011 on whether the management of occupational pension funds is exempt from VAT. The Tax Tribunal has now decided to refer the matter to the European Court of Justice (“the ECJ”).

At the hearing, Counsel for Wheels based his case on the principles established in the earlier JP Morgan Fleming Claverhouse Investment Trust plc decision (“the Claverhouse case”), contending that, since occupational pension schemes facilitate investment in securities, they should be regarded as funds, and that it would be a breach of fiscal neutrality to treat them any differently from other funds that are regarded as special investment funds (“SIFs”) and which are therefore exempt from VAT under EU law. In response, Counsel for HMRC argued that since occupational pension funds are not in direct competition with SIFs there is no breach in fiscal neutrality to treat them differently. Therefore, even if they can be said to be SIFs, the UK is acting legally in exercising its discretion to exclude them from the exemption.

As the Tribunal decided to refer the case to the ECJ, the parties to the case have now been asked to agree the exact questions being referred and to submit these to the Tribunal by 5 April 2011. (It is understood that HMRC expects the questions to be similar to those posed in the Claverhouse case). However it is not expected that the ECJ will hear the case until the first half of 2012. A further update will be issued when news of the decision reaches us.