The approach of Advocate General Kokott in the so-called ‘Dutch pension fund’ cases is to compare the special investment funds in question more closely with the harmonising EU UCITS law than arguably has been the case to date. If the CJEU follows her opinion, this may lead to a stricter interpretation of what is a SIF and one that is different from the UK government’s abandoned attempt to codify the VAT exemption into UK law.

Writing for the 26 April 2024 edition of Tax Journal, Tax Litigation and Resolution partner Giles Salmond explained that despite Brexit, CJEU case law remains relevant when interpreting case law, unless it requires the quashing or disapplication of domestic UK law. Download the full article here; a summary follows below.


The latest ruling on SIFs and VAT

One might have thought that in our post-Brexit VAT world, as far as UK VAT is concerned, we need not concern ourselves too much with judgments and opinions emanating from the CJEU. However, since the FA 2024 came into force following the receipt of royal assent in February this year, the case law and opinions of the court will be as important as ever as aids to interpreting existing UK VAT legislation.

The recent opinion of Advocate General Kokott is a case in point. In X, Stichting BPL Pensioen and others (Joined Cases C-639/22 to C-644/22), she takes yet another look at the scope of the VAT exemption for the management of special investment funds (SIFs), this time in relation to six different, but similar, Dutch occupational pension funds.

The UK VAT liability of the management of SIFs has changed radically over the years in response to case law emanating from the CJEU, which has been asked on several occasions to consider what a special investment fund is and, to a lesser extent, what ‘management’ means. This evolving case law has created uncertainty for the funds industry. Whether or not the fund investor has to pay 20% VAT on management services will often be an important factor in how a new fund is structured and where it is located.


A new world post-Brexit?

After Brexit, we thought the UK would begin to diverge its VAT code from that of the EU, but for now, at least, this seems to be a damp squib. Following the UK’s departure from the EU, the funds industry encouraged HM Treasury to rethink the VAT treatment of financial services. In December 2022, the government embarked upon a consultation on how it intended to achieve the twin aims of (i) improving policy clarity and certainty for all stakeholders on the application of the VAT exemption for fund management services; and (ii) removing reliance on retained EU law.

The government proposed to codify in legislation what was meant by the term ‘special investment fund’ in respect of the VAT treatment of fund management (based on existing CJEU case law), as well as retaining the existing UK VAT legislation contained in items 9 and 10 (and the relevant notes) of VATA 1994 Sch 9 Group 5. The latter legislation spells out in some detail how the UK has chosen to define a ‘special investment fund’, even if it offers no help as to what ‘management’ means.

In response to this consultation, in December 2023, the government essentially decided to do nothing, but indicated it may give some further guidance (see also HMRC’s Policy Paper published on 15 April 2024, ‘Interpretation of VAT and excise law from 1 January 2024’, which makes reference to fund management and updating guidance as necessary). The government’s attempt to codify the VAT exemption for the management of special investment funds was abandoned.

Perhaps this was a good thing since AG Kokott says in her opinion that the CJEU case law does not give absolute clarity as to the meaning of the VAT exemption for ‘the management of special investment funds as defined by Member States’, contained in article 135(1)(g) of Council Directive 2006/112/ EC (the ‘Principal VAT Directive’ or ‘PVD’).


What is the significance of the judgment?

The remainder of the Tax Journal article addresses the following questions:

  • What is the impact of FA 2024 s28?
  • What approach has AG Kokott taken in the joined cases?
  • What exactly is a SIF?
  • Are occupational pension funds SIFs?
  • Where does this leave us?

Read the full article here.



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