- Policy Change Announcement: The brief details a significant policy update allowing employers to fully recover input tax on investment costs associated with pension fund management, following the Court of Justice of the European Union’s ruling in the PPG case, effective from 18 June 2025.
- Removal of Dual Use Concept: HMRC will no longer consider investment costs as having dual use between employers and pension fund trustees, enabling employers to deduct all associated input tax without the need for apportionment, while trustees can also claim deductions for services they provide to employers if VAT-registered.
- Implications for Businesses: Companies may need to develop new partial exemption special methods (PESMs) to align with this updated policy on VAT recovery, with further guidance expected from HMRC by autumn 2025.
Source gov.uk
Other sources
- Policy Change Announcement: Revenue and Customs Brief 4 (2025) introduces a significant policy change allowing employers to recover input VAT on costs related to the management of pension fund investments, following the CJEU decision in the PPG case.
- Removal of Dual Use Apportionment: HMRC will no longer require apportionment of input tax for investment costs between employers and trustees, viewing all associated input tax as fully attributable to the employer, subject to standard deduction rules.
- Trustees’ VAT Deductions: Trustees providing pension fund management services to employers can also deduct input tax incurred for these services if VAT-registered, with deductions subject to the usual rules. This new policy takes effect on 18 June 2025.
Source KPMG
See also
- C-26/12 (PPG Holdings) – Deduction of input tax – Pension fund – Concept of ”management of mutual funds” – VATupdate
- Roadtrip through ECJ Cases – Focus on ”Exemption” – Management of special investment funds” (Art. 135(1)(g)) – VATupdate
