BB/15A/05 VAT—recovery of input tax by employers in respect of funded pension schemes—the 30/70 splitBusiness Brief, Issue 15. 9 August 2005This Business Brief clarifies the rules relating to recovery of input tax by employers who provide funded pension schemes for their staff and, in particular, sets out the correct application of the rule commonly known as the 30/70 split. This is to address increasing HMRC concerns that businesses are applying the 30/70 split more generously than is intended and recovering input tax to which they are not entitled. The new arrangements will come into effect from 1 October 2005.BackgroundAn employer usually establishes a funded pension scheme under a trust deed and, in consequence, the business activities of the fund are separate from those of the employer. Where trustees of a pension fund are carrying on taxable business activities, they are liable or entitled to register for VAT, although they normally have to restrict their input tax deduction because they usually make mainly exempt supplies. HMRC accepts that
Business Brief, Issue 15. 9 August 2005
This Business Brief clarifies the rules relating to recovery of input tax by employers who provide funded pension schemes for their staff and, in particular, sets out the correct application of the rule commonly known as the 30/70 split. This is to address increasing HMRC concerns that businesses are applying the 30/70 split more generously than is intended and recovering input tax to which they are not entitled. The new arrangements will come into effect from 1 October 2005.
An employer usually establishes a funded pension scheme under a trust deed and, in consequence, the business activities of the fund are separate from those of the employer. Where trustees of a pension fund are carrying on taxable business activities, they are liable or entitled to register for VAT, although they normally have to restrict their input tax deduction because they usually make mainly exempt supplies. HMRC accepts that
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.