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Unlock VAT savings with HMRC's new pension fund VAT ruling

7/6/2025

💷 Unlock VAT Savings: HMRC’s New Pension Fund VAT Ruling
HMRC’s Revenue & Customs Brief 4/2025 brings a game-changing simplification in how employers reclaim VAT on occupational pension fund management fees.

✅ What You Need to Know

Before (Old HMRC Policy):

Employers could only reclaim VAT on pension fund administration fees.
VAT on investment management fees was not recoverable.
Where investment services were shared between employer and trustees, HMRC applied a “dual-use” rule, requiring VAT to be apportioned between the two parties.
Trustees could only reclaim VAT on the portion of investment management they directly paid for and delivered, if VAT registered.

After 18 June 2025 (New HMRC Policy):

Employers can now reclaim 100% of the VAT on both administration and investment management costs, with no need to apportion between employer and trustees.
HMRC has removed the “dual-use” concept—employers are now treated as the sole users of investment services.
If trustees are VAT-registered and supply pension management services to the employer for a charge, they too can recover input VAT incurred in providing those services.
All claims are still subject to standard input tax rules and the 4-year VAT claim limit.

📌 How This Helps Small Business Owners

Maximise VAT Recovery – Small firms sponsoring occupational pensions can now reclaim VAT on previously excluded investment services—potentially hundreds or thousands saved each quarter.
Backdated VAT Claims – The change opens the door to retrospective claims (up to 4 years), unlocking unexpected refunds for past periods.
Simplified VAT Compliance – No more complex invoice apportionment or “dual‑use” arguments. Standard VAT rules apply.
Improved Cash Flow – Quarterly VAT claims could return significant sums—business owners can reinvest these into growth, salaries, or new equipment.

🔄 What You Should Do Right Now

Review Your Pension Arrangements – Check if your employer or trustees have incurred VAT on investment fees.
Consult Your Accountant – Ensure VAT invoices are in your business name or review trustee arrangements.
File or Adjust Your VAT Returns – Claim full VAT on qualifying costs, and explore retrospective claims for up to four years.
Reassess Partial Exemption Methods (PESMs) – If you use these, submit revised methods to HMRC aligned with the new policy.
Prepare for HMRC Guidance – Expect easy‑to‑follow official guidance by autumn 2025.

📞 Why Tax Affinity Accountants?
At Tax Affinity, we’re more than tax advisers—we’re VAT optimisation specialists dedicated to helping small businesses recover every available penny.
We help you:

Identify eligible pension costs
Seamlessly amend past VAT returns
Rework PESMs and ensure HMRC alignment
Handle trustee VAT claims confidently
Ensure transparency, compliance, and peace of mind

Book your free VAT optimisation consultation now and start claiming—don’t watch potential refunds slip away.

👉 Call or fill in our contact us form

🔔 Share This With Other Business Owners!
If you sponsor a pension fund or work with trustees, share this post—it could unlock real cash savings.

And follow Tax Affinity Accountants for more VAT, tax, and compliance insights:

#VATRecovery #PensionFunds #SmallBusiness #HMRC #TaxAffinity #VATClaims #PESM #OccupationalPension #DefinedBenefit #VATSavings #BusinessTax #TaxCompliance #PensionVAT #QuarterlyVAT #TaxAdviceUK

Bottom line: HMRC’s new ruling simplifies VAT recovery and opens doors to valuable tax refunds. But to act fast, you need expert help.

Choose Tax Affinity Accountants—we make VAT recovery easy, profitable, and legal.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts Business, Tax and Accountancy. With branches in Worcester Park and Kingston upon Thames and Epsom and Ewell they are considered in the Industry to be expert tax accountants and tax advisors for both individuals and small & medium sized businesses (SME's). Helping and supporting both individuals and limited company owners / self employed people throughout the UK and the world, they regularly help clients grow their business providing tailored advice and support. Their support has been considered invaluable by many clients and key to their success.

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