Exemption ― pension schemes

Produced by Tolley
Exemption ― pension schemes

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exemption ― pension schemes
  • What is a funded pension scheme?
  • Defined contribution and defined benefit pension schemes
  • VAT treatment of defined contribution schemes
  • VAT treatment of defined benefit schemes
  • Latest guidance on the VAT treatment of defined benefit pension funds
  • Recovering input tax on pension fund costs (70:30 split)
  • Employers
  • Employer managed pension fund
  • Third party managed pension fund
  • More...

Exemption ― pension schemes

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the VAT treatment of funded pension schemes.

What is a funded pension scheme?

A funded pension scheme is established either as a personal or company scheme to provide retirement pensions. The company and / or the employee pay contributions to be invested in the fund during the employee’s working life. The fund is held with separate trustees who can be individuals or corporate bodies and the pension scheme is normally separate from the employer’s business.

Defined contribution and defined benefit pension schemes

A defined contribution scheme is one in which contributions (by the employer and employee) are invested in a fund which is used to buy the employee a pension on retirement. Thus the level of the pension is dependent on the success or otherwise of the underlying investments. The employee, therefore, bears at least part of the risk of the investment.

A defined benefit pension scheme is, by contrast, one within which the pension payable to a retired employee is normally linked to the employee’s final salary (a final salary scheme). Although the employee will normally contribute to the cost of the scheme during his period of employment, the pension received on retirement does not relate directly to the contributions which the employee has made. The employee therefore does not normally bear any of the risk of the investment of the pension fund.

VAT treatment of defined contribution schemes

In ATP Pension Services A/S v Skatteministeriet, ECJ Case C-464/12, the CJEU held that a

Popular documents