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Brief confirms position on pension fund management cost

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HMRC has published Revenue and Customs Brief 8/2015: Deducting VAT on pension fund management costs confirming that it will accept tripartite contracts between the supplier, scheme trustees and the employer as evidence to support an employer’s entitlement to deduct VAT on fund management services in relation to defined benefit pension schemes.

The brief follows on from Revenue and Customs Brief 43/2014 which contains HMRC's policy following the CJEU’s judgment in Fiscale Eenheid PPG Holdings BV (Case C–26/12) (PPG), concerning an employer's entitlement to deduct VAT paid on pension fund management services.

Revenue and Customs Brief 8/2015 sets out the specific arrangements that would need to exist under such contracts in order to deduct VAT. For an employer to be able to deduct VAT, it will be necessary for them to be issued with a valid VAT invoice for the full cost of the supply and to pay the service provider directly for the full cost of the services.

HMRC is still considering the VAT deductibility of certain other types of service and has announced it intends to issue further guidance in the summer.