The Attorney General (AG) has delivered his opinion in ATP case (ATP PensionService A/S v Skatterminsteriert). The AG has concluded that the term "special investment funds" should include occupational pension funds:
- where such funds pool the assets of several beneficiaries; and
- allow the spreading of risk over a range of securities.
This opens the door for occupational pension schemes to fall within the exemption from VAT in Article 13B(d)(6) of Council Directive 77/388/EEC in relation to management services provided to them. This is particularly the case for DC occupational funds, which were the subject of the reference to the CJEU in this case.
Article 13B(d)(d) requires Member States to exempt from VAT "the management of special investment funds as defined by Member States". The AG concluded that assets can only be considered to be pooled where the beneficiaries bear the risk of the investment. The fact that contributions are made by an employer as part of remuneration and that payments out of the fund are only made upon retirement is irrelevant, as long as the beneficiary has a secure legal position with respect to his or her assets. This is for the national courts to decide, although the AG did note that where the investment is lost in the case of death and does not fall to the heirs of the beneficiary, it is unlikely that the beneficiary could be viewed as having a secure legal position.
Although the approach and methodology adopted by the AG in this case differed in some important respects from the approach adopted by the CJEU in the Wheels case (for example the AG dismissed the purpose of the investment as irrelevant in ATP), in both cases a crucial factor in determining whether the pension fund constituted a "special investment fund" was whether or not the beneficiaries bore the cost of the fund and the risk of their investment. In a DC context this is clearly an easier hurdle to jump than in a DB context.
The AG left several questions unanswered. In particular, he did not give an opinion on what services would constitute "management" of a special investment fund. The PPG case has previously suggested that this should cover investment services as well as administration services. Nor did he give any indication of how the exemption for the management of special investment funds should be distinguished from other exemptions (such as the exemption in Article 13B(d)(3)).
Whether or not the CJEU will follow the AG's opinion when it delivers its ruling remains to be seen. The decision will be awaited with interest by employers and trustees of both DB and DC occupational arrangements and those involved in their management, as will the comments of HMRC.