Lawyers have warned that defined benefit (DB) schemes face unnecessary extra VAT charges unless HM Revenue and Customs (HMRC) makes it less complicated for them to reclaim tax.
HMRC was forced to change its guidelines after the European Court of Justice ruled schemes could recovery VAT on asset management costs as well as administration expenses.
But the Association of Pension Lawyers (APL) has warned that HMRC's solution - using unusual tripartite contracts between providers, trustees and sponsors - would require all existing contracts to be rewritten.
The association said this would be expensive and difficult to implement ahead of HMRC's 31 December deadline, and that allowing trustees to amend scheme rules would be a better solution.
The proposed amendment would clarify that services supplied in order to run the pension scheme are provided for the benefit of the sponsor, even though legally the scheme is set up as a trust.
This approach has been backed by the Association of Consulting Actuaries (ACA) and Society of Pension Professionals (SPP).
APL chairwoman Anna Rogers said she hoped HMRC would back the proposal, which would help employers avoid extra VAT charges after December.
She said: "If the principle of future VAT recovery is acceptable to HMRC, which it seems to be, we'd like to find an easier way than for 6,000 DB schemes to have to renegotiate all their contracts with suppliers. Scheme resources are finite and it would be good to put everybody's time and money to better use."
The APL said there were still "big issues" for supplies to resolve with HMRC's proposed tripartite contract approach, including conflicts, professional rules and liability.
Employers are also still uncertain about corporation tax implications of these contracts, and the APL called for an extension to the December deadline to resolve these issues.
Rogers said: "To the extent that tripartite contracts are used, it will be a challenge to get them in place by the end of December when we are still awaiting fundamental guidance from HMRC."
Society of Pension Professionals (SPP) president Duncan Buchanan, who is a partner at Hogan Lovells, said his organisation supported the APL's proposal
He said: "Like the APL, the SPP has been engaged with HMRC on the issue of VAT for pension schemes. The proposal of making a simple amendment to a scheme's rules would avoid the need for schemes to go to the trouble of amending existing contracts with investment providers, administrators and advisers in what is fast becoming an unrealistic timeframe."
A second option put forward by the APL would be add the trustee companies to sponsors' VAT groups, but it warned this approach could have wide implications.
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