HMRC announces changes to VAT treatment of pension fund management charges
Published: 10 October 2017
On 5 October 2017, HMRC issued Revenue and Customs Brief 3 (2017) concerning the VAT treatment of pension fund management services which puts an end to the policy of allowing all pension fund management services provided by insurance companies as exempt from VAT.
The Brief also confirms that defined contribution pension schemes, but not defined benefit pension schemes, qualify as special investment funds (SIFs), the management of which is an exempt supply. Defined benefit pensions schemes are therefore non-SIFs and fund management services provided to such non-SIFs will be considered as taxable supplies for the purposes of VAT. This change is expected to have a limited effect since most pension schemes managed by insurance companies operate as defined contribution schemes. Further, this change will not affect fund managers who are operating a managed account for an investor that is a UK pension scheme if the managed account is held by a special purpose company that is not itself a SIF. This policy change will apply from 1 January 2018.
For further information, please contact Paul Hale.