Weekly VAT Update – 28 November 2017
VAT and Pension Funds
Due to case law and HMRC’s changing guidance pension funds and their advisers need to make certain that they structure their pension scheme arrangements in the most efficient manner.
Firstly in respect of services supplied to pension funds, the ATP pension case concerned a defined contribution pension scheme and it was decided that if it was a Special Investment Fund the services of managing it are exempt.
Because it was:
- Funded by the scheme members; and
- Scheme members bore the investment risk; and
- Scheme members investments are pooled in the fund: and
- Scheme members’ risk is spread over a range of investments
It was a Special Investment Fund and the management services supplied to it were exempt.
HMRC previously took the view that the services were standard rated and a number of providers have made successful reclaims, some substantial, under section 80.
In contrast the management of defined benefit schemes do not meet the criteria of Special Investment Funds, and the services supplied to it are not generally therefore exempt.
However there is ongoing litigation, including a case that has been recently heard but a decision not yet released, which may yet result in further changes
Secondly, there are also implications for recovery of input tax by employers, where HMRC distinguish between investment costs which are generally irrecoverable and administration costs which are generally recoverable, but we will cover this in a future update. However if you wish to discuss this aspect get in touch.
In the past it has been difficult to get a late payment penalty discharged, as any attempts to do so rest on precise law and facts. The landscape has changed a little and in a recent particular case a trader submitted his return on the due date, i.e. 7 days after the month following the VAT quarter end, this being a small trader. However the trader processed the payment literally minutes after banking hours closed and the payment was therefore made the day following that which it was due. The Tribunal allowed its appeal against HMRC’s automatic penalty.