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UK Pensions VAT – Yet Another Update

Keen readers will recall the long-running saga of the correct treatment of VAT incurred by employers on pension fund costs. Following rulings by the ECJ, HMRC had determined that it needed to change existing UK practice. In particular, this affected defined benefit schemes where HMRC had allowed employers to recover some, but not all, of the VAT paid on investment managers’ fees. This ran counter to the ECJ’s decision in the PPG case.

In October 2015 we posted that the HMRC had issued an update on progress (or lack of it) in finding a workable solution that would allow employers to continue to recover VAT as input tax. A number of potential problems had been identified with the ideas that were circulating, including the use of tripartite contracts or adding pension fund trustees to the employer’s VAT group. To give everyone more thinking time, HMRC extended the transitional period during which the old practice could be used until December 2016.

Sadly, nearly a year on, it appears that the problems have not been solved. HMRC have today issued a short (brief?) Brief buying themselves, and employers and scheme trustees, more time. The transitional period has been extended to 31 December 2017, with the possibility of a further extension “if necessary” beyond that date. Welcome news, perhaps, but after so much time has been spent trying to find a solution, it does make you wonder whether the only way out of this conundrum would be to ignore the ECJ’s rulings. Brexit anyone?


© Copyright 2020 Squire Patton Boggs (US) LLP


About this Author

Bernhard Gilbey, Squire Patton Boggs, Tax Attorney, Benefits Lawyer

Bernhard Gilbey leads our Tax Strategy & Benefits practice group and provides tax advice in relation to a wide range of both domestic and international corporate tax issues. This includes identifying planning opportunities for corporate and individual vendors as well as advising on the tax efficient methods of restructuring corporate groups.  Bernhard regularly provides advice to listed and privately owned clients on executive compensation matters ranging from recommending suitable incentive arrangements to the drafting and implementation of the most appropriate plan...

44 20 7655 1318
Catherine McKenna, Pension Attorney, Squire Patton Boggs Law Firm

Catherine McKenna leads our Pensions practice group . Her particular expertise is in providing advice to companies and trustees on all aspects of pensions law, including advice on managing pension risk and developing creative solutions to assist with funding shortfalls. She deals with pension plan restructuring, governance, and the pensions issues arising on corporate activity. Catherine also specialises in Pension Regulator applications and intervention, pension disputes and negotiating all types of pension fund investment management, custody and other third party agreements.

+44 113 284 7045
Caroline Noblet, Squire patton Boggs, employment matter lawyer, multijurisdictional litigation attorney, London

Caroline Noblet co-leads our Labor & Employment Practice Group and is based in our London office. Caroline has approximately 25 years of experience as an employment lawyer, advising a broad range of businesses including FTSE 100 and 250 companies. She is responsible for some of the firm’s key global accounts, as she co-ordinates and advises in relation to all matters of employment law, on multijurisdictional and local issues. She is passionate about the benefit a “one-stop” shop service can bring to clients, in terms of the effective and efficiency of legal services...

44 20 7655 1473