United Biscuits (Pension Trustees) Limited v HMRC (AG’s Opinion, 14 May 2020)

Advocate General Pikamäe (“the AG”) has given his opinion in relation to a case regarding the VAT treatment of pension fund management services.

In 2017, the High Court had held that, as a matter of EU law, such services provided by non-insurers (companies not authorised to conduct insurance business) did not qualify for a particular VAT exemption. When the case was appealed, the Court of Appeal decided to refer certain questions of EU law to the CJEU for a preliminary ruling.


The claimants in the main proceedings were United Biscuits (Pension Trustees) Limited, the trustees of United Biscuits’ DB occupational pension scheme, and the former trustee of the UB Pension Investment Fund (a collective investment fund in which the assets of the scheme were invested between 1989 and 2006), together “the Trustees”.

The Trustees sought to recover from HMRC the VAT they had paid to various investment managers on supplies of pension fund management services between 1 January 1978 to 30 September 2013. These managers included both companies authorised to conduct insurance business (“Insurers”) and companies not so authorised (“Non-Insurers”).


Until 1 April 2019, pension fund management services were treated by HMRC as exempt supplies when provided by Insurers, but as standard rated supplies when provided by Non-Insurers. Before 1 January 2005, this differential treatment had been in accordance with statute. Following amendment of the UK legislation with effect from that date, the difference was no longer in accordance with statute. However, HMRC continued to apply the same approach. (From 1 April 2019, HMRC created parity between Insurers and Non-Insurers, and the supply of all pension fund management services became standard rated.)

The Trustees’ case was that the supplies made by Non-Insurers were “insurance transactions” for the purposes of the Sixth Council Directive 77/388/EEC and the Principal VAT Directive 2006/112/EC (together, “the VAT Directives”) and, as a result, attracted mandatory exemption from VAT.

The Trustees argued that, as UK legislation had at all material times failed to provide for an exemption which was required by the VAT Directives, they and their predecessors had unnecessarily paid VAT to their suppliers. The Trustees claimed that they had a directly effective right to exemption, with a consequential right to recover the VAT payments they had made from HMRC.

High Court and Court of Appeal

In the High Court, Warren J found that the services provided by Non-Insurers were not exempt from VAT during the relevant period. Examining relevant legislation and EU case law, he determined that pension fund management did not fall within the meaning of “insurance” for the purposes of the exemption in the VAT Directives.

Warren J further held that the answer to this issue was “acte clair” (ie the law was sufficiently clear) and, therefore, there was no need to make a reference to the CJEU.

In contrast, the Court of Appeal held that questions of EU law required clarification, and stayed proceedings to make a reference to the CJEU.

AG’s opinion

The AG concluded that fund management services supplied to pension schemes by third-party Non-Insurers could not be classified as an “insurance transaction” within the meaning of the VAT Directives and, on that basis, were not exempt from VAT.

Interpreting “insurance transactions” by context (as there is no definition in the VAT Directives), the pension fund management services did not appear to meet the relevant criteria: ie the investment managers did not contract with the Trustees “to provide any form of indemnification against the materialisation of risk” so the pension fund management services here did “not entail any assumption of a risk by the investment managers for consideration”. However, this point is “for the referring court to verify on the basis of the elements of fact and of law before it”.

Whilst the First Life Assurance Directive (Directive 79/267/EEC) describes pension fund asset management as a class of insurance, this did not mean that it generally constitutes a life assurance activity within the meaning of the EU rules on insurance.

The AG also found that there was nothing to justify extending the VAT exemption to ancillary services regulated by reference to, and in conjunction with, insurance services. Further, if the meaning of the term “insurance” for VAT purposes was allowed to differ from one Member State to another, this would be contrary to the principle of the uniform application of the VAT Directives.

Fiscal neutrality

The AG rejected arguments relating to fiscal neutrality (the principle which means that supplies of goods or services which are similar, and which are therefore in competition with each other, may not be treated differently for VAT purposes). The UK’s different treatment of Insurers and Non-Insurers (until 1 April 2019) “cannot constitute an argument for changing those criteria of EU law”. The concept of fiscal neutrality would be breached if services that did not meet the set criteria could benefit from the exemption provided for. In addition, the principle of fiscal neutrality cannot be used to extend the scope of an exemption in the absence of clear wording to that effect.


The case will now return to the Court of Appeal.