United Biscuits (C-235/19) – no insurance VAT exemption for pension fund management 



The Court of Justice of the European Union (CJEU) has ruled that pension fund management services, which do not include any risk indemnity, do not fall within the insurance VAT exemption, regardless of whether they are supplied by insurers or non-insurers.

In practice, this decision means that there is no current scope to apply VAT exemption to the investment management of defined benefit pension schemes.

The United Biscuits case will now return to the Court of Appeal to apply the CJEU’s judgment, which may be sufficiently clear to dispose of UB’s appeal without the need for further consideration by the UK courts.


The case concerns the VAT liability of services provided to the applicants, comprising the discretionary management of the assets of: (i) a defined benefit (DB) pension scheme; and (ii) an investment fund in which the DB scheme had invested.

The investment managers supplying the services did not provide any coverage or indemnification against any risks (e.g. the risk of poor investment performance or capital losses).

The United Biscuits (UB) pension scheme had originally paid VAT on the management services supplied by investment managers who were not insurers (the non-insurers).

UB sought to challenge this, arguing that such services should be treated as VAT-exempt, in the same way that HMRC had accepted that insurers could treat their pension fund management services as exempt during the periods in question. (HMRC’s practice of accepting exemption in relation to insurers’ supplies of pension fund management was withdrawn with effect from 1 April 2019.) 

Reference to the CJEU

The case came before the Court of Appeal in February 2019, which referred the following question to the CJEU:

Are supplies of pension fund management services as provided to the Trustees by (a) Insurers and/or (b) Non-insurers "insurance transactions" within the meaning of Article 135(1)(a) of the VAT Directive 2006/112/EC?

CJEU judgment

The CJEU has agreed in full with the position of the Advocate General.

Not an "insurance transaction"

The essentials of an "insurance transaction" as settled by CJEU case-law include:

(i) A risk to be covered;

(ii) An insurer providing the insured with an agreed service in the event that risk materialises; and

(iii) The payment of a premium in return for that undertaking.

On the facts of the case, the criteria were not met, as the services contracted for by UB consisted of fund management, and did not involve the manager providing any sort of indemnity from risk.

Interaction with Insurance Directives

The fact that the "management of group pension funds" is included in the list of "operations" set out in the First Life Assurance Directive does not mean that it should be regarded as insurance.

Next steps

The CJEU's short determination (that pension fund management services with no risk indemnity cannot be VAT-exempt insurance transactions) means that the investment management services supplied to UB were taxable.

It also means (following Wheels) that there is no current basis in EU law for applying VAT exemption to most services comprising the management of DB schemes or their assets.

The case will now return to the Court of Appeal to apply the CJEU's judgment - although, given the content of that judgment, we see no scope for UB's appeal to suceed.

However, until such time as the UB litigation finally concludes, the most risk-averse approach for businesses with existing claims and appeals relating to these proceedings would be to maintain them until the case reaches its final determination.