On 5 October 2017, HMRC announced that, with effect from 1 January 2018, it will withdraw its policy of allowing all pension fund management services supplied by regulated insurers to pension funds without “special investment fund” (SIF) status to be exempt from VAT. This means insurers will need to determine whether a pension fund qualifies as a SIF in order to determine the correct VAT treatment.
Historically, HMRC’s policy has been to allow all pension fund management services provided by regulated insurance companies to be exempt from VAT. However, following the recent CJEU’s decisions in Wheels Common Investment Fund Trustees Ltd v HMRC (Case C-424/11) and ATP Pension Services A/S v Skatteministeriet (C 464/12), HMRC now accepts that pension funds that have all the required characteristics are SIFs and the services of managing and administering those funds are, and always have been, exempt from VAT. Pension funds that do not have all those characteristics will not qualify as SIFs and will not be within the scope of the exemption.
HMRC understands that the majority of pension fund management services provided by insurers are supplied by defined contribution pension funds and therefore qualify (and have always qualified) for exemption as SIFs, following the judgment in ATP Pension Services.
A copy of Business Brief 3 (2017) is available to view here.