Employers Recovering VAT Paid for Pension Funds

The European Court has ruled that employers are entitled to recover all of the VAT tax they pay for running a separate pension fund. In the Dutch case of PPG Holdings, C-26/12, on 18th July the Court decided that costs of both the administration of pensions and management of the investment fund could be recovered. Even though the pension scheme was a different legal entity still the VAT paid by PPG as employer had a direct link as a general overhead and so might be recovered.

As a VAT barrister I was interested in this case as HMRC’s policy has generally been to allow administration costs to an employer but with management of the investment fund to be recovered by the pension scheme. Their Notice 700/17 (Jan/13) “Funded pension Schemes” at part 3.3 for example has a suggested 30% management vs. 70% investment split where a single invoice is provided. But given the Court ruling in PPG it may be some employers now look at making a retrospective claim, subject to conditions.

Eamon McNicholas
Tax Barrister, Accountant

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About Eamon McNicholas

Tax Barrister, Accountant www.EamonMcNicholas.com
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