HMRC have now revised its view on VAT and DB pension scheme management costs. As a result of the PPG judgement there are now circumstances where employers may be able to claim additional VAT input in relation to pension schemes where they were not previously able to do so.
In addition to continue to benefit from the existing VAT recoveries, the Employer needs to consume the service, be party to the contract, pay for the service, and receive a VAT invoice. It had been thought that a tripartite agreement would be the solution, and HMRC still stand by this for management services, however it is not an effective solution for other services, ie Legal, Actuarial and Audit.
In view of the significant practical changes that the new requirements may introduce HMRC have allowed a transitional period. This has recently been extended to run until 31 December 2016 and during this time the old rules can continue to be applied.
A pro-active, independent VAT review in respect of the effect of the pension scheme on the sponsoring employer prior to receiving any contact from HMRC would help you be on the front foot and understand the likely impact of the changes. It may also highlight opportunities for further recovery and possibly retrospective claims.
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