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HMRC internal manual

VAT Input Tax

Specific issues: when employers should charge output tax in connection with funded occupational pension schemes – arrangements that can be applied following CJEU decision in PPG

If an employer receives a taxable supply of administration and/or investment services and recharges the cost onto the pension scheme, that recharge is consideration for an onward supply.  The trustees use the services, and are charged a consideration.  VAT is due accordingly. This VAT is potentially deductible by the pension scheme to the extent that it is engaged in making taxable business supplies.  See VIT45510.

Where the cost is built into a regular review and adjustment of the employer’s contributions, rather than being a specific recharge of the costs involved, HMRC will (generally) accept that this does not constitute consideration for a supply and that no VAT should be charged.