Keywords: funded pension schemes, VAT, input tax, management services, investment services, employers, trustees, group registrations, insolvency
Understanding the VAT implications of funded pension schemes is crucial for both employers and trustees. This guide provides a comprehensive overview of the relevant regulations, outlining the key considerations for claiming input tax and addressing specific scenarios.
Funded Pension Schemes and VAT:
- Definition: A funded pension scheme is one where contributions are vested in separate trustees, typically individuals or corporate bodies.
- Purpose of VAT Rules: The special rules for funded pension schemes aim to clarify the VAT treatment of services incurred, considering the distinct roles of employers and trustees.
Types of Pension Schemes:
- Funded Schemes: VAT rules apply as explained in this guide.
- Unfunded Schemes: No specific funds are set aside, and normal VAT rules apply.
- Schemes with Segregated Reserve Funds: Treated as funded schemes for VAT purposes.
VAT Treatment for Employers:
- Management Services: VAT incurred on management services (e.g., setting up the fund, collecting contributions, managing pensions) is generally treated as input tax.
- Investment Services: VAT incurred on investment services (e.g., advice, brokerage charges) is not considered input tax.
- Evidence for Input Tax Claims: Tax invoices in the employer’s name are required.
VAT Treatment for Trustees:
- VAT Registration: Trustees may need to register for VAT if the scheme makes taxable supplies.
- Input Tax Claims: VAT incurred on management services is generally not treated as input tax, but exceptions apply (e.g., employer ceasing business).
Group Registrations and Pension Schemes:
- Including Trustees in Group Registrations: Corporate trustees can be included in VAT group registrations with the employer.
- Implications for Outputs and Inputs: VAT treatment of outputs and inputs is affected by group registration.
Attribution of Services:
- Management vs. Investment Services: A guide is provided to help determine the attribution of services for VAT purposes.
Insolvent Companies:
- VAT Deductibility: VAT on costs incurred in winding up an insolvent company’s occupational pension scheme is deductible.
Additional Resources:
- Related VAT Notices: Links to relevant VAT notices are provided for further information.
Understanding the VAT implications of funded pension schemes is essential for both employers and trustees. By following the guidelines outlined in this guide, you can ensure accurate VAT treatment and optimize your tax position.
Disclaimer:
This information is intended for general guidance only and should not be considered a substitute for professional advice. Please consult with a qualified tax advisor for personalized guidance on your specific circumstances.
8.11 VAT and SIPPs
The companies that offer life insurance are the ones that typically issue personal and stakeholder pension plans. These businesses can recover little to no input tax because they are primarily exempt from VAT. As a result, the funds might not be subject to income or capital gains taxes, but they might not be able to claim dividend or VAT tax credits.
Because SIPPs’ services are “unbundled” and usually not provided by life insurance companies, they are handled differently than other types of plans. But a series of cases proved that there might be a VAT exemption if there is a relationship with a life insurance company—possibly because the life insurance company serves as an administrator.
What Are Defined Contribution and Defined Benefit Pension Plans?
FAQ
Do pension contributions go on VAT return?
Are pensions tax exempt?
Are pension plans taxable entities?
Is pension income taxable in India?
Which pension funds qualify for VAT exemption?
In addition to funds that contain the pooled assets of defined contribution occupational pension schemes, such as that at issue in ATP, funds that contain the pooled assets of personal pension schemes and that have all of the above characteristics will also fall within the VAT exemption for fund management services.
Are defined contribution pensions VAT exempt?
The management of defined contribution occupational pension schemes may be exempt from VAT. Consequently, Revenue accepts that a defined contribution scheme (within the meaning of the Pensions Act 1990) is regarded as a specified fund. Are pensions VAT exempt? The payment of pensions and receipt of contributions are exempt transactions.
Are DC pension schemes exempt from VAT?
In light of the ATP judgment, HMRC recently accepted that DC schemes are able to qualify as SIFs, with the result that investment management services are (and always have been) exempt from VAT. However, HMRC has also confirmed that pension schemes that don’t have these particular characteristics do not fall within the scope of the exemption.
Are investment management services VAT exempt?
This judgment is on foot of an opinion concerning the classification for VAT exemption purposes of investment management services supplied to the trustees of an occupational pension scheme. 2 The ECJ has considered VAT on services provided to pension funds on numerous occasions and in different factual circumstances.