On 5 September HMRC announced a further extension to the period during which companies with defined benefit pension schemes may continue to operate the existing regime for recovery of VAT on scheme costs (under which the company may reclaim 30% of the VAT charged on investment management fees). HMRC had previously extended the period to the end of 2016 but it will now continue to the end of 2017.
HMRC still maintains that it is necessary for an employer to both contract and pay for services in order to be deemed the recipient of the services for VAT purposes. However, it is still exploring suitable arrangements under which employers can achieve this without other unintended consequences such as costs becoming disallowed in the calculation of corporation tax.
HMRC has not ruled out a further extension if it has not found a suitable solution by late 2017.