Published by Tyron Potts on
However, a series of technical hurdles have proved too difficult for HMRC and the industry to resolve in the timescales self-imposed by HMRC last year. As a result, transitional arrangements effectively allowing VAT reclaims to continue under present practices, will now remain in place at least until 31 December 2017.
In light of continuing uncertainty, unless pre-emptive changes have already been made to adviser agreements or corporate structures, it would appear that continuing to play the waiting game might be a popular option.
This is the third time the deadline for finding PPG-compliant solutions has been extended, and may not be the last as HMRC intends to “consider the need for a further extension if necessary” later next year – recognising that several obstacles remain in their path and, despite working closely with the industry over the last year, time has just about run out to remove them.
Whilst the key challenges which necessitate a further deadline extension appear technical, it is feasible that several years down the line we could yet find that, when the UK exits the European Union, the need for a completely new approach to VAT on pension costs will evaporate.
As the PPG ruling was made in the European Courts, it is possible that following post-Article 50 (Brexit) negotiations, UK employers and pension schemes may no longer be bound to comply with PPG. We may therefore find that the transitional deadlines are extended far enough out that we will eventually turn full circle and end up back at square one. Perhaps this is HMRC’s intention – to sit on the problem for long enough that eventually it will go away?
In any case, Brexit negotiations are likely to trump sorting out technical VAT matters when it comes to allocating Government departmental resources, so don’t expect this to be removed from the ‘too difficult’ pile anytime soon, or at least not treated as a higher priority by Whitehall.
Some companies and trustees have already started implementing solutions based on initial drafts of HMRC’s guidance, released to the industry for consultation earlier this year.
Nevertheless, in a nod to the issues that have been holding up finalising their guidance, HMRC warns that adopting these new structures too early “could have wider implications … in respect of regulatory requirements  and Corporation Tax deductions ”.
In light of continuing uncertainty, unless pre-emptive changes have already been made to adviser agreements or corporate structures, it would appear that continuing to play the waiting game might be a popular option. However, where action has been taken, trustees and companies will need to discuss whether or not to unpick the work carried out to date.
In the meantime, we will ponder whether and how Brexit will make a difference, keeping VAT on the agenda for the foreseeable future.