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UK Pensions Speedbrief: Update on VAT on pension scheme costs

  • United Kingdom
  • Pensions
  • Pensions - Defined benefit
  • Pensions - Defined contribution


HMRC has extended the transitional period for the VAT treatment of pensions scheme costs to the end of 31 December 2017.

This means that pension schemes and sponsoring employers may continue to rely on HMRC’s guidance set out in HMRC Notice 700/17 until the end of next year.

Alternatively, schemes and sponsoring employers may, before this date, adopt one of the alternative structures which may lead to an improvement in overall VAT recovery of pension scheme costs. Eversheds has been fully engaged with HMRC and industry bodies in developing these alternative options and can assist with the relevant tax advice and implementation

HMRC’s latest business brief sets out these options in more detail and indicates that further guidance will be published by the end of this year. In particular, HMRC has clarified that where a sponsoring employer pays an asset manager under a tripartite contract the sponsoring employer is not entitled to a corporation tax deduction.

HMRC has confirmed that it is still considering representations which have been made more recently, in particular, in relation to asset management services and whether there are alternative tripartite structures that would enable a corporation tax deduction. Further guidance is due to be published later this year.

For more information about pension schemes and VAT please see our previous speedbriefs here and here.