Pension fund management services are not “insurance” for VAT purposes; and an end-consumer (still) has no direct claim against HM Revenue & Customs for refunds of “mistakenly paid” VAT

30 Nov 2017

United Biscuits (Pension Trustees) Ltd and another v HMRC [2017] EWHC 2895 (Ch)

The High Court (Warren J) has dismissed a claim by United Biscuits (Pension Trustees) Ltd (“UB”) against HMRC for refunds of (allegedly) overpaid VAT.

UB is the trustee of a defined benefits pension fund.  It claimed restitution of sums paid by way of VAT on supplies of pension fund management services provided by undertakings that were not authorised insurance companies (“Non-Insurers”).  Supplies of such services by Non-Insurers have always been treated as standard rated under UK law.  The two main issues were (1) whether the supplies by Non-Insurers were to be treated as exempt supplies of “insurance”, because (allegedly similar) supplies of pension fund management services by authorised insurance companies (“Insurers”) had were treated as exempt; and (2) if Non-Insurers’ supplies should have been exempt, whether EU law required UB to be given a direct claim against HMRC to recover sums they had overpaid by way of VAT to the Non-Insurers (notwithstanding the Supreme Court’s recent decision in Investment Trust Companies (In Liquidation) v  RCC [2017] UKSC 29; [2017] 2 WLR 1200; [2017] STC 985, “ITC SC”).

Warren J decided both issues in favour of HMRC and dismissed UB’s claim.  On Issue (1), Warren J held that the services were not “insurance transactions” within the meaning of Article 13B(a) of the Sixth Directive (388/77/EEC) or Article 135(1)(a) of the Principal VAT Directive (2006/112/EC) and were thus properly standard rated.  Further, the principle of fiscal neutrality did not require them to be treated as if they were “insurance transactions” (and thus exempt) or to be given the same (incorrect) VAT treatment as supplies of pension fund management services by Insurers.  On Issue (2), Warren J held that EU law did not require UB to be given direct claim against HMRC (a process which would require the Court to create a common law cause of action in unjust enrichment and to disapply the statutory bar on such causes of action in section 80(7) of the Value Added Tax Act 1994, notwithstanding ITC SC): it was not “impossible or excessively difficult” for UB to vindicate any EU law rights it may have via the route dictated by UK statute, namely a claim against the Non-Insurer.

If he were wrong on Issues 1 and 2, Warren J considered that any direct claim against HMRC would be a claim in unjust enrichment; and that the bar in section 80(7) would have to be disapplied only to the extent necessary to allow UB a claim for the 4-year period prior to the issue of the claim form, having regard to the 4 year “cap” on claims by Non-Insurers against HMRC under section 80(4) VATA 1994.

Andrew Macnab appeared for HMRC.

To read the judgment please click here.