HM Revenue and Customs (HMRC) has extended the deadline to implement revised methods for the deduction of VAT on pension costs.
The transition period has been extended by a further 12 months, meaning that organisations and trustees now have until 31 December 2017 to amend arrangements whereby employers can recover VAT that is incurred by running a workplace pension scheme, following a European Court of Justice (ECJ) ruling in 2013.
With accounting rules, case law and reconciling the ECJ decision with pension and financial service regulations taking longer than expected, the extension to the deadline is due to be reviewed again in December 2017 to see whether a further extension is necessary.
During the extended transition period, those who have already made changes in light of the ECJ decision and previous HMRC guidance may continue with these arrangements, provided that both the employer and pension scheme trustees agree and that they both apply the same treatment. Alternatively, they can revert back to prior treatment of VAT on pension fund management costs.