VAT on pension fund management services – update

VAT on pension fund management services – update


Since posting our news item regarding pension fund management services on 5 October 2017, we have received an update from HMRC. This gives more information about the change in VAT treatment from zero-rated to standard-rated, and also announces that the 1 January 2018 commencement date has been postponed to give the industry more time to implement the changes.


The HMRC update in full is as follows:


“Following a meeting with the Investment Association and the Association of British Insurers, it was agreed that we would provide more details on the scope of the policy changes announced in Revenue and Customs Brief 3 (2017): VAT – treatment of pension fund management services


“The policy changes announced in this Brief will apply as follows:


  • Pension fund management services provided by insurers to defined benefit occupational pension funds will change from being VAT exempt (as insurance) to being subject to VAT at the standard rate.
  • This will bring them in line with the same services provided by non-insurers.
  • This does not affect pension fund management services provided by insurers in respect of defined contribution occupational and personal pension funds which are generally exempt from VAT (as the management of ‘Special Investment Funds’ – see VATFIN5120 Exemption for the management of ‘special investment funds’: Pension Funds).
  • This does not affect intermediary services supplied to insurers (or to their policyholders) in respect of pensions (or annuities) provided by them under contracts of insurance (eg, SIPPS) – the introduction and administration of these contracts will continue to be exempt under the insurance exemption.


“Industry representatives have also told us that more time is required by insurers to implement these changes and we have agreed to postpone the 1 January 2018 commencement date pending HMRC consideration of industry proposals for a revised date sometime later in 2018 or in the first half of 2019. The revised implementation date will be notified shortly and the HMRC VATINS guidance will be updated to include these changes.”