VAT and pension scheme costs
Produced in partnership with Christopher Stiles of Gowling WLG

The following Pensions practice note produced in partnership with Christopher Stiles of Gowling WLG provides comprehensive and up to date legal information covering:

  • VAT and pension scheme costs
  • VAT basics
  • VAT treatment of costs relating to occupational pension schemes
  • HMRC’s old policy on the ‘direct and immediate link’ and why it had to change
  • HMRC’s policy before July 2013
  • The PPG case and resulting changes in HMRC policy
  • HMRC’s policy between July 2013 and October 2017 (the transitional period)
  • HMRC’s current policy on the ‘immediate and direct link’
  • Distinction between administration services and investment services
  • Administration
  • More...

VAT and pension scheme costs


This Practice Note contains references to case law of the Court of Justice of the European Union (CJEU). Broadly, EU judgments handed down on or before IP completion day (11 pm on 31 December 2020) continue to be binding on UK courts and tribunals (even if the EU courts later depart from them) until the UK courts exercise their powers to diverge. For the most part, EU case law made after that date is not binding on the UK, although the UK courts and tribunals may continue to ‘have regard to’ EU judgments if relevant. For more detailed information on the treatment of EU case law, see Practice Note: Introduction to retained EU law.

VAT basics

The Value Added Tax (VAT) system in the UK, which was derived from European law, is mainly set out in the Value Added Tax Act 1994.

VAT is a tax on customer expenditure. A business that is registered for VAT is liable to pay across VAT to HMRC on the value of supplies of goods and services made by it, and so adds VAT onto the price it charges customers for those supplies. Such a business can claim credit for VAT it pays on goods and services used by it. The VAT that the business adds onto its

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