HMRC has announced a 12 month extension to the transitional period under which an employer is entitled to deduct VAT paid on services relating to the administration of defined benefit pension schemes and the management of their assets.
The transitional period, which was due to end on 31 December 2016, has now been extended to 31 December 2017.
Trustees of pension schemes and sponsoring employers have, for some time, been anxiously awaiting some further clarification from HMRC of its policy regarding VAT recovery conditions of employers and trustees of DB pension schemes.
It would appear however that HMRC has encountered a number of issues in its attempt to reconcile the European VAT Court’s decision in PPG Holdings, with pension and financial service regulations, accounting rules and the implications of corporate tax deduction.
Given the contractual, regulatory, independence and accounting issues which HMRC will have to reconcile, we are unlikely to see any further guidance on VAT recovery of pension costs until at least Autumn 2017.
For any further information, please contact David Wilson or your usual RSM contact.