It is now more than three years since, in light of the PPG case, HMRC announced their intention to withdraw their approved treatment for VAT recovery on services provided in connection with defined benefit (DB) pension schemes, including the 70/30 split concession on investment services. The attached link will take you to the current guidance.

With only two months remaining before the end of the latest transitional period, HM Revenue & Customs (HMRC) have now announced that the current approved options for employers to recover VAT on services supplied to DB pension schemes will not be withdrawn but will be retained indefinitely.

While, unusually, this change in policy was not set out in a Revenue & Customs Brief, HMRC released an update to their VAT Input Tax Manual on 1 November 2017 which outlined their revised position. The Input Tax Manual is intended as guidance for HMRC officers when applying the law; it is not legally binding, but does represent HMRC's policy and can be taken as an indication of HMRC's likely approach to a particular issue.

The alternative arrangements which HMRC and taxpayers have been grappling with since the decision of the CJEU in PPG, including tripartite agreements, onward-charging arrangements and VAT grouping, will also remain available to taxpayers and may – in the case of investment services – enable recovery on a greater proportion than 30% of the fees.

Guidance on these arrangements, as previously announced in HMRC Briefs, has now been incorporated into the Input Tax Manual.

Given the complexities involved, employers which sponsor DB pension schemes are advised to review their current arrangements for recovering VAT on services supplied to these schemes to consider whether they are complying with HMRC requirements and whether they can do more to maximise recovery.

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