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HMRC internal manual

VAT Input Tax

Specific issues: third parties providing both administration and investment services to funded occupational pension schemes – arrangements where the employer does not directly contract and pay for the services.

When the supplier issues a single tax invoice for a single supply comprising both administration and investment services, an apportionment between these services is necessary. HMRC accept, by way of a simplification, that 30% of the cost relate to the administration services when the third party:

  • provides both the pension fund’s administration and investment services; and
  • issues one VAT invoice for both of the services.

Any employer who does not consider that 30% is a fair proportion of the supply to attribute to administration services is required to provide evidence to HMRC to support a different attribution.

A third party can apportion their supply between investment and administration services and issue separate invoices. Where this happens the employer is entitled to treat the whole of the VAT incurred on administration costs as their input tax and is not permitted to treat any of the VAT incurred on the investment costs as their input tax.

Where the result of the apportionment is not fair the employer is required to use an alternative method. The alternative method is required to reflect the proportion of the supply attributable to administration services.

More on how to attribute services between administration and investment activities is given at VIT44750