Europe's top court has denied UK final salary workplace pension funds the chance of a one-off 2 billion pound ($3.01 billion)windfall after a ruling rejected a call for an exemption from paying VAT on some fund manager fees.
The judgment by the Court of Justice of European Union means that pension schemes will continue to pay about 100 million pounds a year in VAT and will not be able to make backdated claims to 1990 that could have totalled 2 billion pounds, umbrella organization the National Association of Pension Funds (NAPF) said on Thursday.
The legal action, which started in 2008, followed a dispute between HM Revenue & Customs (HMRC) and pension funds represented by the NAPF that investment trusts had special status and should not pay VAT on investment management services.
"Pension funds were set up to be vehicles that are free from tax, and they should not be paying these VAT charges," Joanne Segars, chief executive at the NAPF, said in a statement.
The action was initiated by the NAPF and the 6 billion pounds Wheels Common Investment Fund in 2008.
($1 = 0.6643 British pounds)
(Reporting by Sarah Mortimer; Editing by Elaine Hardcastle)