HMRC has restated its entire policy on VAT and pension fund costs in the light of the
PPG and ATP cases. Employers may only recover VAT on pension costs if they can show that they are a party to the contract with the service provider and pay for those services. If the employer recovers VAT but passes it onto the pension fund, output VAT will be due. A transitional period has been given for the 70/30 split to 31 December 2015. During this period, employers will need to discuss with their pension trustees the best way forward – either through contractual changes or other structural changes – to achieve the ultimate position. Ultimately, this may improve the VAT recovery position for certain businesses, but there is no one size fits all approach