VAT on pension scheme costs


28 January 2016


For VAT exempt businesses such as schools, universities and financial institutions, VAT is usually an irrecoverable cost. So when a legal decision forces a change to the VAT treatment of goods and services this can result in a windfall for the VAT exempt business. 

Due to a recent European Court decision, costs paid to fund managers who administer defined contribution pension schemes should now be treated as VAT exempt. Furthermore, such services should always have been VAT exempt and HMRC have invited claims from fund managers for VAT over charged which is to be refunded to their customers.

If your business has a defined contribution pension scheme, the VAT on the fees for administering that fund over the last 4 years should now be refunded by the fund manager(s) and VAT should not be charged in future. 

Fund managers, actuaries and other pensions professionals have been slow to react to this change and will not often instigate a claims process unless specifically requested to do so by their clients. Therefore, your business may have to act quickly to avoid losing VAT that was paid on the cusp of the 4 year maximum timescale for claims.

Get in touch 

If your business has a defined contribution scheme and has paid VAT on fees to set up or manage that scheme then we would like to hear from you. Johnston Carmichael can calculate the value of the VAT you have been overcharged and prepare claims for submission by pension scheme providers on your behalf. Get in touch with our Employment team here