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HMRC internal manual

VAT Registration

Entity to be registered: trusts and pension funds: types of pension fund

Many companies offer the benefits of a pension scheme to their employees. They take a variety of forms but the main types are:

Pooled pension schemes

Under these schemes, contributions are paid into a pension fund constituted and administered under irrevocable trust. The assets of the fund are invested or otherwise employed by the trustees for the benefit of the fund (and ultimately the beneficiaries). Members’ benefits are paid out of the fund as a whole and they have title neither to any separate part of the fund nor to any specific assets; that is to say, there is a common trust fund. Any superannuation fund which constitutes a common trust fund will fall within this category.

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Non-pooled pension schemes

In these schemes, contributions are paid to a life office to provide pension, lump sum and/or death benefits. Each member’s benefits are secured by way of an insurance policy or policies (or possibly under a group policy which incorporates a number of individual policies) and such insurance is specifically earmarked for the individual member. Contributions may be paid either directly to the life office by the employer, or to one or more trustees who will make the necessary arrangements for the insurance (with the life office) and for the payment of benefits. Any retirement benefit scheme which does not operate through a common trust fund will fall within this category.

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Un-funded pension schemes

Under these schemes, employers promise to pay the employee a pension at a certain age but make no special provision to set aside funds for the purpose. There is no separate pension fund and no protection for the employee against the bankruptcy or liquidation of the employer.

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Definition of pension fund trustees

Trustees may be appointed to administer the types of pooled and non-pooled schemes described above. The creation of a trust fund protects present and future beneficiaries by separating the assets of the fund from those of the sponsoring employer’s business. As with other types of trust, there may be one trustee or several and the trustees may be natural persons or corporate bodies. The sponsoring employers themselves may be a trustee of the fund.

As with other trusts, the trustees of a pension fund will have dual personality for VAT purposes. They may be registered individually in respect of their own business activities and then again as trustee in respect of business activities carried on by them on behalf of a pension fund.

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Registration of pension fund trustees

A pension fund is not a person but, when trustees make taxable supplies using the assets of the fund, it is the trustees collectively who are the taxable person. They should be registered in the names of the trustees and the pension fund in the same way as with other trusts. For example, ‘Joseph Bloggs and Frederick Bloggs as trustees for the United Workers Pension Scheme’ (see VATREG12900).

Separate registration of trustee and non-trustee activities will be the norm. However, there are some circumstances in which one registration will suffice to cover both:

  • the normal business activities of the person, and
  • the activities carried on by them in a fiduciary capacity as trustee of the pension fund.

These circumstances are:

  • where the sponsoring employer is itself the sole trustee of the pension fund operated for the benefit of its own employees
  • where the corporate trustee of a pension fund is the sole trustee and is a member of a VAT group
  • where a trust company is incorporated solely to administer a single pension fund.

However, we cannot prevent a trader from having his beneficial and his fiduciary activities treated separately for VAT purposes.