HMRC had planned to bring in new rules for recovering VAT from January 2017 but long-standing current practices can now continue until January 2018. This extension to the transitional period is welcome.
Current practices are based on VAT Notice 700/17 as amplified by the Briefs HMRC has published since the PPG case at the ECJ that opened up the issue.
HMRC's most recent draft guidance focusing on tripartite contracts as a way ahead had not found favour because of legal issues over conflicts of interest for trustee and employer clients and for the suppliers of advice services.
Other options HMRC suggested were for trustees to register for VAT and for a corporate trustee to join the employer's VAT group.
HMRC says it is taking longer than expected to reconcile the developing case law (see, for example, the wider issues mentioned in our earlier update) with pension and financial service regulations and with accounting rules.
Where a scheme has changed its approach in line with the post PPG Briefs already published, HMRC says this can continue or the scheme can revert to its earlier practice.
In some cases, a scheme and the employer may wish to consider whether adopting one of the options HMRC has mooted would improve VAT recovery. We are continuing to consider the pros and cons here but do not anticipate reaching an early conclusion.
The draft guidance HMRC was working on is now on hold while it considers the emerging wider issues.
HMRC's Policy Paper with the news is available here.