No exemption from VAT for pension fund management - United Biscuits (Pension Trustees) Ltd and another v HMRC
Following years of case law, the ECJ has decided that pensions fund management services supplied to trustees of an occupational pension scheme are not exempt from VAT under Article 135(1)(a) of Council Directive 2006/112/EC (on the common system of value added tax) which provides an exemption for insurance services. The Directive required that Member States exempt certain transaction from VAT including those in relation to "insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents".
By way of background United Biscuits (Pension Trustees) Limited (UBP) is the trustee of a defined benefit occupational pension and United Biscuits Pensions Investments Limited (UB) the former trustee of a collective investment fund in which the assets of that scheme were invested. Successive trustees of those funds had recourse to management services, which were supplied by both insurers and non-insurers and of the services provided.
UBP unsuccessfully asked HMRC for reimbursement of the VAT at issue and a succession of case law then ensued which resulted in the Court of Appeal (England & Wales) referring the following question to the ECJ:
'Are supplies of pension fund management services provided to the [applicants] by (a) insurers and/or (b) non-insurers "insurance transactions" within the meaning of Article 135(l)(a) of the [Directive 2006/112]?'
The ECJ held that the relevant directive must be interpreted as meaning that investment fund management services supplied for an occupational pension scheme, which do not provide any indemnity from risk, cannot be classified as 'insurance transactions' and therefore do not fall within exemption laid down in that provision in favour of such transactions.
Pension Schemes Bill progressing
This Bill is now being considered by a Public Bill Committee which will scrutinise the Bill line by line and report on Thursday 5 November 2020 (or possibly earlier). The Committee has stated that those with relevant expertise or a special interest in the Bill can submit written views for the Committee to consider and should do so as soon as possible for those views to be taken into account.
Whilst the Bill, as drafted, allows regulations to be made to stipulate the conditions which persons, including a pension scheme member, will need to meet to have a statutory right to transfer their pension savings to another scheme, there is an expectation that the government may introduce additional provisions in this area to ensure that all of the "red flags" associated with typical scams are addressed and may be considered in assessing whether a transfer should be allowed to proceed.
PPF consultation on draft levy determination
Consultation on the levy determination for 2021/22 has commenced and closes on 24 November. The PPF has confirmed that regardless of an expected increase in the number of claims on the PPF it is in a sufficiently strong position and that means no increase in levies is expected.
Two main developments are proposed for the coming levy year:
- the levy for schemes with less than £20m in liabilities will be halved. The reduction will be tapered so that only schemes with £50 million or more in liabilities will be charged in full; and
- the cap on the amount of levy paid by any individual scheme will be cut from 0.5% of that scheme’s liabilities to 0.25%.
The developments proposed are expected to benefit close to 2,000 schemes of SME employers.
Protected Pension Age easement – ceasing 1 November 2020
In response to concerns about the potential loss of protected pension age where individuals in receipt of pension benefits, were to be re-employed in relation to COVID-19, HMRC introduced an easement. This easement suspended certain tax rules in relation to protected pension ages for those who returned to work, where the only or main reason for re-employment was to help their employer respond to the public health, social, economic or other effects of COVID 19.
Whilst this easement was extended (and it was thought may be further extended), it has now been confirmed that this will cease to apply on and from 1 November 2020.
If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to get in touch with your usual contact.