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VAT Information Sheet 6/98, June 1998

This information sheet contains important information for all local authorities who administer pension funds. It supplements the guidance contained in Notice No 749A “Local authorities and similar bodies—VAT status of activities”.

1 VAT treatment

1.1 Funded pension schemes

Separate trustees

It is usual for an employer to separate a pension fund from their business activities. Where there are separate trustees the VAT treatment is as follows—

Administration of the scheme. The day to day management of a pension scheme is part of an employer's business and any VAT incurred on goods or services is reclaimable by them as input tax subject to the normal rules. If a scheme provides pensions for the employees of other businesses, any VAT incurred has to be apportioned between the respective employers. However, special arrangements allow for one of the participating employers to recover the VAT, provided they undertake to recharge each of the other employers with their share of the costs and VAT thereon.