Following the decision in the case of PPG Holdings BV by the ECJ, HMRC has withdrawn its existing policy under which it considers investment management costs as relating solely to the activities of a pension scheme. 

This means that employers may now be entitled to deduct VAT on some pension fund investment management activities as general costs. However, HMRC has confirmed that it will not allow VAT to be deducted by an employer where the services were not provided to the employer and where the supply was limited to investment management services only (i.e. it was not a combined supply of both investment management and pension administration services). As transitional arrangements will apply for six months, employers who pay for combined administration and investment management services provided to their pension scheme, should check the terms of HMRC policy carefully.

The announcement can be viewed by clicking here.