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HMRC have announced they are to be much stricter on the VAT treatment which employers and pension funds currently enjoy. This is likely to result in more VAT being paid. 

CJEU decisions have set out a few general principles: 
That VAT should be charged on the management of DB schemes
That the management of DC schemes is exempt from VAT
Managers should not charge VAT for qualifying DC schemes without fully specifying what these are
An employer can recover VAT on both the administration and management of its pension scheme rather than just on the administration on a 30/70 split and this 30/70 split stops from 1 January 2018 onwards

However, these decisions only go so far in helping explain the VAT regime for pension funds. The legislative changes, supplemented by HMRC bulletins, are needed to fully implement the new regime, and these are still lagging behind. 

The latest HMRC bulletins for October 2017 say that:
For pension fund management costs, currently charges by insurers to manage DC and DB schemes are exempt from VAT, but from 1 January 2018 such charges for DB schemes will be subject to VAT. This change affects, for example, insured DB schemes.  

Published:26 October 2017


Pensions Law Update - October 2017

Key Contact

Penny Cogher