Deloitte Weekly VAT News - Week ended 12 August 2005

Many employers will face increased costs as a result of a review of the "70/30" rule that has been used to allocate VAT on the management of funded pension schemes between the scheme trustees (who usually cannot recover VAT) and the employer (who usually can). According to Customs, businesses have been applying the rule too generously and recovering too much VAT. From 1 October 2005, fund managers who solely provide investment management will not be able to use the rule and those that additionally provide scheme administration services will have to justify the amount that is charged to employers. Businesses that continue to benefit from the 70/30 split after 30 September 2005 may face VAT assessments.