The above Brief outlines HMRC's view of the VAT treatment of supplies made by pensions consultants to employers in connection with work place contract-based pensions in light of recent changes to the way that such consultants are remunerated.

The changes are as a result of the Financial Services Authority's ruling that from 1^st January 2013 Employee Benefit Consultants and other pensions consultants are banned from receiving commission based remuneration (subject to exceptions under transitional arrangements for clients engaged before this date). These businesses are now required to agree ‘consultancy charges’ with the employer instead, which may in some cases be supplemented by separate fees charged directly to the employer.

Businesses supplying such services therefore need to establish the correct VAT treatment for these services taking into account what is the precise nature of the service supplied, and who is the recipient of that service, amongst other factors. Businesses that advise and assist employers in relation to the setting up and/or ongoing administration of Group Personal Pensions should charge standard rated VAT to employers on services provided to them in return for ‘consultancy charges’ or other fees.

Employers should be aware that they will normally be able to recover the VAT that is charged to them on these services as input tax, subject to partial exemption and input tax rules. The VAT treatment of services provided to employees will depend upon the nature of the services provided (further guidance can be found in the appropriate VAT guidance manuals). Services to employees, even if paid for by the employer, will not generally attract input tax recovery.