Written answers

Tuesday, 11 November 2014

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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216. To ask the Minister for Finance regarding the changes contained in section 63(1) of the Finance Bill which exempts administration services of defined contribution occupational pension schemes from VAT, except one member arrangements, if that clause was inserted in order to comply with the European Court of Justice ruling in the so-called ATP case; if he is aware that the vast majority of defined contribution one member schemes are administered by life companies whose pension business is VAT exempt anyway; his views on whether section 63(1) breaches the principle of fiscal neutrality by confirming a distortion in the marketplace between insured providers of one member schemes and uninsured providers, given that uninsured providers are, in the main, small Irish businesses rendering exactly the same services as those provided by insurers; if he will consider an amendment which would eliminate the words other than a one member arrangement, within the meaning of that Act, from the relevant subsection; and if he will make a statement on the matter. [43184/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The proposal contained in Section 63(1) of the Finance Bill 2014, which exempts the management of defined contribution occupational pension schemes from VAT, is necessary to ensure Irish VAT law complies with the recent decision of the European Court of Justice in the ATP Pension Services (Case C-424/12).

The ECJ judgment, which has direct effect in the State, concerns the VAT treatment of management services provided to a defined contribution occupational pension scheme. The ECJ found that the pension funds at issue may be regarded as a special investment fund where the funds are invested using a risk spreading principle and the pension customers bear the investment risk. The Court also held that the essential characteristic of a special investment fund is the pooling of assets of several beneficiaries, enabling the risk borne by those beneficiaries to be spread over a range of securities.

I am advised by the Revenue Commissioners that it is their understanding that "one member arrangements" are generally administered by life insurance companies and through Small Self-Administered Schemes (SSAS's). The trustees of "non-insured" contribution pension schemes have a much greater discretion as to how the scheme funds are invested, and there is no requirement that the investments are pooled. In such circumstances, it is Revenue's view that the administration of such schemes do not meet the ECJ principles for VAT exemption. In contrast, many smaller schemes in Ireland are "insured" schemes in which investments are made on a unitised/non-segregated basis and concern a contract of insurance held by the pension holder. The trustee has little opportunity to determine the investment strategy in relation to the assets underlying the policy. The management of such schemes by an insurance company are exempt as the supply relates to insurance intermediation.

The principle of fiscal neutrality precludes economic operators carrying out the same transactions from being treated differently in relation to the levying of VAT. Revenue are of the view that the principle of fiscal neutrality is not breached as the providers are supplying different services to the pension holder.

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