In previous editions of Pensions Pieces and Pensions Priorities we have highlighted recent developments in cases about whether or not pension schemes in certain European jurisdictions are exempt from VAT.  As we mentioned in the February edition of Pensions Pieces, the Court of Justice of the EU found that certain pension schemes could constitute a special investment fund and so be VAT- exempt in certain circumstances and in other cases that VAT on expenses paid by the employer for the scheme could be reclaimed as a business expense. 

Until recently, in the UK, HMRC has allowed employers to deduct VAT incurred in relation to the management of their pension schemes but not investment management costs, and where an invoice covered both it allowed a 30 (administration) /70 (investment management) % split of the VAT. However, following the cases referred to above, HMRC issued a briefing note in February 2014 which appeared to tighten, rather than relax, its rules. 

Now, HMRC has issued a further update stating that, after consulting with various bodies, it is further reviewing the UK treatment of VAT and pension schemes and that subsequent guidance on this will be issued in the autumn.  It has also said that the transitional position in its February 2014 briefing referred to above can be used in the meantime.