HMRC recently updated its guidance on VAT recovery for defined benefit pension schemes, clarifying a more favourable position for recovering VAT on asset management costs while potentially restricting recovery on administration costs.
Key takeaways
Employers and trustees can access improved VAT recovery on asset management costs through a VAT grouping or on-supply structure.
HMRC appears to have withdrawn its previous concession allowing employers to recover VAT on administration costs as a business overhead where invoices were addressed to them.
Administration costs now appear to be aligned with asset management costs, making VAT grouping or on-supply structures increasingly important.
Schemes already using these arrangements should consider reviewing historic asset management costs before the four-year recovery window closes.
Other employers and trustees may wish to assess whether adopting these structures could improve VAT recovery on both asset management and administration costs.
