UK: The NAPF/Wheels VAT Case – Where Is It Now And What Action Should Be Taken?

Last Updated: 1 November 2011
Article by Peter Steiner

Originally published on October 31, 2011

Keywords: NAPF, Wheels, VAT, pension funds, DB Schemes


This update looks at the long-running case brought by the National Association of Pension Funds (the "NAPF") and Wheels Common Investment Fund Trustees ("Wheels") (and others) against HMRC and the decision of the First-Tier Tax Tribunal (the "Tribunal") to make a reference of certain issues central to that case to the European Court of Justice (the "ECJ"). Although the decision to make a reference was made in February 2011, the exact scope and terms of the reference were not known until August 2011.

Here, we explain the key implications of the NAPF/Wheels case for occupational defined benefit (including 'final salary') pension funds ("DB Schemes"), common investment funds and pension fund managers, as well as other types of pension fund. Key points to take away are as follows:

  • Trustees of DB Schemes and affected common investment funds should ensure that their fund managers have filed protective claims with HMRC for the recovery of potentially overpaid VAT on fund management services.
  • DB Schemes and affected common investment funds may wish to file protective claims in their own right, although HMRC has suggested that if the ECJ decides against HMRC, HMRC will only repay overpaid VAT to fund managers and it will then be up to the fund managers to repay VAT to their managed funds.
  • There is a rolling VAT recovery period of four years so it may be necessary to update protective claims to cover later periods.
  • Although the reference to the ECJ relates specifically to DB Schemes, other types of pension fund – in particular, defined contribution pension funds – may wish to consider asking their fund managers to make protective claims.


The NAPF/Wheels VAT case concerns the VAT treatment of fund management services supplied to Wheels (a common investment fund) and three DB Schemes of the Ford Motor Company group (the "Ford Pension Funds"). In September 2007, after the judgement of the ECJ in JP Morgan Fleming Claverhouse Investment Trust plc and another v Commissioners for HM Revenue and Customs [2007] (Case C-363/05)1, the supplier of the fund management services submitted a claim to HMRC for the repayment of VAT accounted for in respect of the supplies of fund management services to Wheels and the Ford Pension Funds, suggesting that those services should be treated as exempt from VAT under the UK VAT rules. HMRC rejected the claim, which triggered an appeal to the Tribunal by the NAPF, Wheels and the Ford Pension Funds (together, the "Appellants").

HMRC's position is based on the interpretation of a provision of the EU VAT Directive which make the "management of special investment funds as defined by member states" a VAT exempt supply. HMRC considers that DB Schemes are not "special investment funds" principally because they are not open to the public and because the amounts invested in a DB Scheme are 'disconnected' from the amount of the contribution to the fund, the investment performance of the underlying assets and the management fees paid by the fund.

The Appellants argue that DB Schemes do fall within the definition of "special investment funds" because they share the key characteristics of a collective investment fund in which a number of persons pool their investments to generate a single return from a spread of investments made by that fund. Accordingly, it would be in breach of the principle of 'fiscal neutrality' for DB Schemes to be treated differently to other types of collective investment funds.

The Tribunal considered it was unable to decide the appeal without guidance from the ECJ and therefore has made a reference of certain key issues to the ECJ, essentially to determine whether the term "special investment funds" is capable of extending to DB Schemes and common investment funds in which their assets are pooled. It is estimated that it will take one to two years before the reference is considered by the ECJ.


If the ECJ's decision goes in the Appellants' favour, it is estimated that DB Schemes receiving supplies of fund management services in the United Kingdom will save around Ł100 million per year in VAT costs. In addition, some pension fund managers (and pension funds themselves) may be in a position to make backdated claims against HMRC for substantial amounts of overpaid VAT. Furthermore, although the reference to the ECJ relates specifically to DB Schemes, other types of pension fund – in particular, defined contribution pension funds – may also benefit from a decision in the Appellants' favour and may wish to ask their fund managers to file protective claims with HMRC and/or to make protective claims themselves.

The flipside of a decision in the Appellants' favour is that fund managers will see a very significant change in their VAT recovery position. Presently, these services are taxable supplies for VAT purposes, meaning that fund managers may recover VAT they pay on related supplies. If fund management services supplied to DB Schemes are VAT exempt, fund managers will no longer be able to recover the VAT they pay on related supplies. This may trigger an increase in fund management fees.


1 Here, the ECJ held that fund management services supplied to investment trusts are exempt from VAT. The UK VAT rules were amended to extend VAT exempt status to fund management services supplied to closed-ended collective investment undertakings as well as authorised unit trust schemes and open-ended investment companies. However, fund management services supplied to DB Schemes and common investment funds into which their assets are pooled are not currently recognised by HMRC as VAT exempt supplies.

Visit us at

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2011. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.