Commentary

BB/15A/05 VAT—recovery of input tax by employers in respect of funded pension schemes—the 30/70 split

Part V16 Forms and other HMRC material

BB/15A/05 VAT—recovery of input tax by employers in respect of funded pension schemes—the 30/70 split

BB/15A/05 VAT—recovery of input tax by employers in respect of funded pension schemes—the 30/70 split

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.

Background

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

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