On 5 October, HMRC published Revenue & Customs Brief 3 (2017) which clarifies how insurance companies should treat their provision of management services to pension funds for VAT purposes.

Historically, HMRC have accepted that those services were all exempt from VAT.  However, in recent years the ECJ has distinguished between the management of defined contribution pension schemes (which is VAT exempt) and of defined benefit schemes (which is standard rated) by virtue of defined contribution pension schemes being “special investment funds” (SIFs) for VAT purposes and defined benefit schemes not being SIFs.

This Brief confirms that HMRC will now apply this treatment to insurance companies so that they will be required to charge VAT if they provide management services to defined benefit pension schemes in the UK.