Input tax ― pension schemes

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at VAT recovery associated with pension schemes for both employers and pension fund trustees.

For an overview of input tax more broadly, see the Input tax - overview guidance note.

For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.407C.

VAT recovery and pension schemes - the basics

There are a variety of different means by which an employer may provide pensions to its employees. These include:

•
insurance based schemes where retirement benefits are secured through an insurance policy
•
unfunded schemes where no specific funds are set aside to pay pensions
•
schemes where the employer provides for the payment of pensions by a segregated reserve fund in the balance sheet, represented by specific assets
•
funded pension schemes where the pension contributions are vested in pension scheme trustees

The first three categories above present no major unique challenges for VAT recovery. Costs are incurred by the employer and VAT may be recovered in line with the

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