UK defined benefit pension funds are not special investment funds and are therefore not exempt from paying VAT on investment management services, the Court of Justice of European Union (CJEU) has ruled.
The judgment means that pension schemes will continue to pay about £100m a year in VAT and will not be able to make backdated claims to 1990 that could have totaled £2bn, according to the National Association of Pension Funds (NAPF).
The long-running case against HMRC was brought by the NAPF and Wheels Common Investment Fund (WCIF), with its underlying Ford pension schemes.
The action began in 2008 following a ruling in the European Court on JP Morgan Fleming Claverhouse Investment Trust plc. The court stated then that investment trusts were special investment funds and should be exempt from paying VAT on investment management services.
The NAPF and WCIF brought the case because they believed that...