The £8 billion ($15.7 billion) Wheels Common Investment Fund, Warley, England, and the London-based National Association of Pension Funds are jointly filing a legal challenge to the U.K. government’s ability to collect value-added tax on investment management services linked to corporate pension assets, NAPF spokesman Mark Brooks confirmed.
If successful, about 650 corporate defined benefit funds with about £1 trillion in total assets could save an estimated £100 million annually. In addition, the funds may qualify to receive up to £300 million in backdated VAT payments from the previous three years, Mr. Brooks said. Currently, the tax rate is about 17.5% of the management fees.
The case against HM Revenue & Customs, Britain’s tax department, follows a separate ruling in June 2007, when the European Court of Justice ruled that investment management services provided through pooled funds are exempt from VAT.
“There is a strong case that defined benefit occupational pension funds should be exempt from paying VAT on investment management services,” Joanne Segars, NAPF chief executive, said in a news release. “A successful outcome … would reduce running costs and increase the available money for investment.”
The case will be decided by the U.K. VAT & Duties Tribunal. HM Revenue & Customs officials could not be reached by press time.
