There are issues for businesses and their funded pension schemes to consider in relation to whether or not VAT should be charged on bought in services and if it is, how much of the VAT can be reclaimed and by whom (either the sponsoring employer or the pension scheme).
The new guidance allows existing rules on VAT recovery to continue and the withdrawal of the 70:30 concession did not take effect from 31 December 2017 as previously indicated and its ongoing use is permitted. Alternative options for VAT recovery, which could lead to an increase in the overall amount reclaimed are set-out and should be considered by organisations and their pension schemes.
Recommended action: The impact of the guidance is fact specific and there are points of detail which require consideration to understand its impact. Our initial experience has been that for many organisations action is needed to, as a minimum, preserve existing amounts of VAT recovery or to take the opportunity to increase the amount of VAT reclaimed.