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VAT concession to be withdrawn on solicitors search fees

Date posted: 8th Jul 2020

Historically, HMRC have applied a concessionary treatment in relation to postal search fees, charged by solicitors.

 

This follows on from the Brabners v HMRC case, from a few years ago, which challenged the VAT treatment on disbursements charged on by solicitors, to their clients. In particular, HMRC challenged the VAT position on electronic search fees. Back then the First Tier Tribunal case confirmed HMRC’s view that, in most cases, electronic search fees did not meet the definition of a disbursement. Therefore electronic search fees are subject to output VAT.

 

However, that decision did not affect the ability of law firms to treat postal searches as disbursements and therefore pass these costs onto their clients, without charging output VAT. It has since been announced that this treatment will not be the case, from 1 December 2020.

 

We would therefore recommend that law firms review their systems in advance of these changes to ensure that they are compliant from 1 December 2020.

 

If your legal practice needs assistance with any VAT or tax matters, please do contact our Tax team here or call us on 01325 349700.

 

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