VAT deduction on the management of pension funds

HMRC recently issued a Revenue & Customs Brief updating their Policy on VAT recovery entitlement on pension scheme investment costs (please see link below).

VAT deduction on the management of pension funds - GOV.UK

It is a positive development as it opens the door for sponsoring employers to be able to fully recover VAT on investment costs (subject to their normal VAT recovery position).

The updated policy therefore removes the previous concept that investment costs were ‘dual use’ (whereby an apportionment of VAT incurred between the employer and trustees was required).

At this stage, RCB4/25 does however provide limited guidance on the practical application of HMRC’s updated policy with further detailed guidance on the arrangements needed in order to support recovery is expected later this year.

There is a meeting with HMRC in August to discuss specific clarifications needed on the application of the new Policy. Members are invited to share any specific questions with the contact below and we will feed these into HMRC for comment.

Following the meeting we will provide an update of any meaningful developments.

In the meantime, members are invited to consider what the changes may mean for their own schemes. If any support is required please do contact your tax adviser or if you wish to raise a query, please contact PRAG through the website and this can be passed to the PRAG VAT Working Group.