In the ECJ case of PPG Holdings BV in 2013, the European Court concluded that in some circumstances VAT could be recovered on investment fees incurred by pension schemes.  This decision caused HMRC to review how VAT is claimed by UK pension schemes.  As part of that review, HMRC removed the concession which has been in operation for many years, under which certain costs, including administrative costs, of running a pension scheme can be reclaimed by the scheme employer as part of its VAT returns, subject to a transitional period.  This move therefore left schemes facing a possible 20% increase on their running costs at the end of the transitional period.

HMRC guidance

HMRC guidance has decided to extend the transitional period to 31 December 2016.  In addition it contains comments on:

  1. the corporation tax position on tripartite agreements;
  2. HMRC's views on "back to back" administration agreements;
  3. corporate trustees joining an employer's VAT group;
  4. other options being considered for VAT reclaims on investment management fees, promising further guidance "later this year" on corporation tax recoverability.


The current concession is an easy, and easily understood, way of reclaiming VAT on scheme running expenses.  It looks likely that VAT reclaims will be able to be continued in one form or another at the end of the transitional period, but the method will vary from scheme to scheme and be more of an administrative burden to run.  Which method is best will vary between organisations.