A legal bid to secure the same VAT treatment for pensions funds as other investment funds, has been launched by taxpayers, reports the Financial Times.

The decision to take the matter to court follows a similar challenge last year by investment trusts, which won a European ruling in their favour.

A successful challenge would allow the pension funds sector to receive an estimated £300m in backdated VAT over the last three years. Pension funds would also be exempt from paying about £100m a year in VAT in the future.

The case is being brought by Wheels Common Investment Fund, a £8bn multi-employer scheme covering Ford Motor Company, Jaguar Cars and Land Rover and the national Association of Pensions Funds.

Initially the case will be presented to the UK VAT & Duties Tribunal but could be referred to the European Court of Justice.