VAT: Brief (14/16): PPG Update | KPMG | UK
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VAT: PPG Update - extension of transitional period until the end of 2017

VAT: PPG Update

HMRC release Brief (14/16) announcing a 12 month extension to the transitional period which was due to end on 31 December 2016.


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HMRC have issued a further Brief on the CJEU decision in PPG. The Brief confirms that the transitional period for the VAT recovery on pension fund costs is to be extended until 31 December 2017. The Brief explains that this is due to the fact that it is taking longer than expected to reconcile the court decision with pension and financial service regulations, accounting rules and emerging case law. This means that taxpayers may continue to use the 70/30 split as outlined in Notice 700/17 Funded Pension Schemes until 31 December 2017.

The Brief states that towards the end of this period, HMRC will review this position and consider the need for a further extension if necessary. The guidance that HMRC were intending to publish on possible options for recovery is also on hold whilst HMRC consider the wider implications of the options being proposed. The Brief adds that adopting alternative structures to comply with the requirements for VAT deduction by the employer could have wider implications, in particular in respect of regulatory requirements and Corporation Tax deductions. The Brief also makes reference to taxpayers that have already made changes to their structure and/or contractual arrangements to comply with the judgment. The Brief states that, provided the employer and pension scheme trustees agree and both apply the same treatment, these taxpayers may continue with those arrangements. To access the Brief click here.

This will be welcomed by businesses who do not currently incur significant sticking VAT costs associated with the management of pension fund assets. However, post the PPG Judgment it was widely considered that certain suitably structured fully taxable businesses could mitigate sticking VAT costs associated with the management of pension fund assets. Businesses should consider their current ‘as is’ position in relation to sticking VAT costs to identify what can be done to enhance VAT recovery and measure the impact of the changes.

For further information please contact: 

Mark Hagan

Tel: +44 161 2464252


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