The Court of Justice of the European Union (CJEU) has issued decisions in two cases, ATP Pension Service A/S and PPG Holdings,that will  have an impact on the VAT treatment of fund management services provided in relation to pension  schemes and, in some cases, may generate an opportunity for employers and pension scheme trustees  to obtain a refund of VAT.

In the ATP Pension Service A/S  case, the CJEU held that fund management services provided in  relation to defined contribution pension schemes were, contrary to how they had previously been  treated, exempt from VAT. This means that the suppliers of such services should not have charged  VAT in relation to those services,  and, accordingly, there is now an opportunity for employers and  trustees who have received such services and who were unable to recover, in full, the VAT that they  were charged, to seek a VAT refund. This will require the assistance of the suppliers of the fund  management and scheme administration services, but, generally, this will be forthcoming.

Employers may, as a result of the CJEU decision in PPG Holdings, be able to make a full recovery of  VAT charged in relation to fund management services that they have previously not been able to  recover, although, in some cases, employers may cease to have an entitlement to recover VAT charged  in relation to related administration services that they had previously reclaimed. 

Historically, employers carrying on fully taxable business have been allowed to reclaim 30% of the VAT incurred on single supplies of  administration and investment management services. Those employers may now be able to recover the  balance of the VAT, although whether, and the extent to which, they can recover the VAT is  determined having regard to factors such as whether the services are contractually supplied to the  employer and whether the costs are passed onto the pension schemes.

If you require further advice on the implications for you of these two decisions, your usual VAT  adviser should be able to assist. However, if you prefer, we can make you an introduction to a VAT  adviser with particular expertise in this area (and who is advising a number of employers and  pension scheme trustees in relation to the implications of the decisions).