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VAT recovery and pension schemes ― the basics

There are a variety of different means by which an employer may provide pensions to its employees. These include:

1. •

   insurance based schemes where retirement benefits are secured through an insurance policy

2. •

   unfunded schemes where no specific funds are set aside to pay pensions

3. •

   schemes where the employer provides for the payment of pensions by a segregated reserve fund in the balance sheet, represented by specific assets

4. •

   funded pension schemes where the pension contributions are vested in pension scheme trustees

The first three categories above present no major unique challenges for VAT recovery. Costs are incurred by the employer and VAT may be recovered in line with the