london view

Recovery of VAT on pension fund administration costs

HMRC confirms position

Rob Marchant, Partner, VAT
london view

We are aware that there has been some inconsistency in approach by certain pension fund administration service providers as to which entity they are prepared to invoice. It is common for many suppliers of such services to be engaged by the pension scheme, but to be asked to invoice the sponsoring employer so that it can reclaim the VAT charged. However, we are aware that some suppliers were not prepared to invoice an entity with whom they had not contracted.

Guidance from HMRC

We have clarified the position with HMRC, who confirmed that this arrangement is acceptable to them, and this is confirmed in their guidance VIT 44700. The guidance states that the sponsoring employer can:

“…treat VAT incurred on the day-to-day administration of the scheme as its input tax even where the trustee is responsible for the general management of the scheme under the trust deed and where the trustee contracts and pays for the services supplied. However, in such circumstances, trustees must arrange for invoices to be made out by the supplier in the name of the employer so that employers hold tax invoices made out in their own name in order for them to be able to deduct VAT.

Application going forward

This confirmation will be welcome news to many organisations that have suppliers who are engaged by the scheme Trustees, and who have been reluctant to address their invoices to the sponsoring employer. Note that this principle does not apply to investment related services such as investment management fees, where a different set of considerations apply. It is also worth noting that in situations where the supplier insists on invoicing the scheme Trustees, that there are still steps that can be taken to enable VAT recovery.

How Crowe can help

If you would like further advice on this matter, please contact Robert Marchant or your usual Crowe contact.

Contact us

Robert Marchant
Robert Marchant
Partner, VAT and Customs Duty services