VAT Refund Opportunity – Employer Pension Schemes

A recent VAT decision at the European Court of Justice (“ECJ”) may have opened the door for employers to reclaim additional VAT on pension fund costs.

The ECJ in the Dutch case PPG Holdings BV has confirmed that an employer should be able to reclaim VAT on the day to day management of the scheme and the management of the scheme’s investments. HMRC’s policy currently blocks VAT recovery on the investment management element (which in most cases means that only around 30% of costs are recoverable).

It is not clear how HMRC will react to this Dutch case, however if an employer has been limiting its VAT recovery on pension fund costs there is an opportunity now to make a retrospective claim to HMRC going back 4 years. Given the fact that HMRC are sometimes slow to react to developments like this, submitting a claim now will protect employers against the 4 year capping rules.

If you are VAT registered and operate a separate employer pension scheme (either a defined benefit scheme like PPG’s or a defined contribution scheme) there may be scope to make a retrospective claim going back 4 years.

If you wish to discuss this opportunity in more detail please contact either Iain Masterton, Senior VAT Manager or Helen Mackenzie, Tax Partner