HMRC has released Revenue and Customs Brief 09/03 VAT: Corporate pensions – FSA’s Retail Distribution Review – treatment of ‘consultancy charges’ for services supplied to employers.

The Brief confirms the VAT implications of regulatory changes that will affect the way that Employee Benefit Consultants (EBCs) and others providing services to employers for the setting up and administration of workplace contract-based pensions will be remunerated in the future. Services supplied to employers or trustees in respect of occupational pension schemes held through trusts are not covered by this Brief.

The Brief affects:

  • Businesses (such as EBCs) that advise and assist employers and/or employees in connection with contract-based group personal pension plans
  • Employers that receive these services

Businesses supplying the above services need to establish the following in order to determine the correct VAT treatment:

  • What is the precise nature of the service supplied?
  • Who is the recipient of that service?

HMRC states that businesses that advise and assist employers in relation to the setting up and/or ongoing administration of group personal pensions should charge standard rate VAT to employers on services provided to them in return for “consultancy charges” or other fees. Employers should be aware that they will normally be able to recover the VAT that is charged to them on these services as input tax, subject to partial exemption and input tax rules. The VAT treatment of services provided to employees will depend upon the nature of the services provided (further guidance can be found in the VATFIN and VATINS guidance manuals). Services to employees, even if paid for by the employer, will not generally attract input tax recovery.

For further details click here.