Our recent article regarding VAT and pension funds overlapped the issue by HM Revenue & Customs of Business Brief 16/05.
HMRC had originally stated that the 70/30 split of fund management fees between investment and administration was going to be withdrawn, and our Law Now reflected this.
Their subsequent business brief stated that the matter was being reviewed, following lobbying made by representative bodies such as IMA, and therefore withdrawal of the 70/30 split was to be delayed.
CMS Cameron McKenna LLP is working on the IMA VAT sub- committee and will continue to lobby for a fair outcome. However, we also know the team working on these issues within HMRC, and it is our belief that from their point of view, this issue will not go away.
Corporates and pension fund managers should therefore continue to review their position. For larger funds the irrecoverable VAT being incurred even under the 70/30 split can be in the region of £100 - 400k.
Depending on issues such as your investment mandate, it is possible to prevent VAT being charged in the first place by restructuring your investments. If you are interested in saving what can amount to hundreds of thousands of pounds by removing an unnecessary VAT burden particularly on defined benefit funds and would like to discuss our ideas further, please contact the author/authors of this article.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 22/11/2005.
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