UK – The UK’s tax authorities have postponed changes to the VAT regime for pension funds following representations from the National Association of Pension Funds.
At issue is the amount companies can claim for VAT purposes for services provided to their pension funds, known as the input tax. This has traditionally worked on the 30/70 split – where the revenue service has accepted that the employer can treat 30% of the VAT charged as input tax.
But the authorities now argue that it is now possible for separate invoices to be issued for management services and for fund activities – and it has found that the 30/70 rule does not always apply.
“In some cases, the 30/70 split is even being used where fund managers are providing no pension scheme administration services whatsoever to the employer, but are provided services that wholly to exploitation of the fund’s assets,” the HM Revenue & Customs (the Inland Revenue), said earlier this year.
The changes were originally meant to come in at the start of this month and were then put back to January next year.
HMRC has consulted with the NAPF and the Investment Management Association “with a view to determining a more relevant split in the light of changes to the management of
funded pension schemes”. The two bodies are consulting their members, a process which should be completed by the end of January.
The HMRC said it was withdrawing its measure since “any final agreement may be different to the changes announced earlier”.
“Employers can therefore continue with their current VAT recovery arrangements in relation to funded pension schemes until a further announcement is made.”