This Practice Note looks at the basics of what Value Added Tax (VAT) is in relation to the employer’s business, HMRC's policy on establishing the ‘immediate and direct link’ necessary to enable an employer to reclaim VAT and how this policy changed over time. This includes the 70/30 split, the distinction made by HMRC between ‘management’ and ‘investment’ costs, tripartite contracts, VAT grouping and trustee subcontracting. This Practice Note also looks at the VAT exemption applicable in respect of DC schemes.