The Law Society has published interim guidance on the VAT treatment of electronic searches, following its latest engagement with HMRC on what it sees as ‘inconsistencies’ arising from the decision of the FTT in Brabners LLP [2017] UKFTT 666 (TC). The Law Society announced in April that HMRC had begun to contact law firms directly.
HMRC has confirmed that a property search fee may be treated as a disbursement where it is passed on to the client without comment or analysis. However, if the firm uses the search itself, for example in providing advice, or a report, the fee will form part of the charges for its services and will be subject to VAT.
The Law Society holds a different view, ‘that no distinction should be drawn between postal searches and electronic searches’ and it ‘would expect the tax position for what is essentially the same activity to be consistent’.
Nevertheless, the Law Society continues to recommend that firms follow HMRC’s published guidance ‘in the absence of a binding decision of an Upper Court’.
The Law Society would still like to hear from firms who receive approaches from HMRC in relation to the VAT treatment of historic searches.
The Law Society has published interim guidance on the VAT treatment of electronic searches, following its latest engagement with HMRC on what it sees as ‘inconsistencies’ arising from the decision of the FTT in Brabners LLP [2017] UKFTT 666 (TC). The Law Society announced in April that HMRC had begun to contact law firms directly.
HMRC has confirmed that a property search fee may be treated as a disbursement where it is passed on to the client without comment or analysis. However, if the firm uses the search itself, for example in providing advice, or a report, the fee will form part of the charges for its services and will be subject to VAT.
The Law Society holds a different view, ‘that no distinction should be drawn between postal searches and electronic searches’ and it ‘would expect the tax position for what is essentially the same activity to be consistent’.
Nevertheless, the Law Society continues to recommend that firms follow HMRC’s published guidance ‘in the absence of a binding decision of an Upper Court’.
The Law Society would still like to hear from firms who receive approaches from HMRC in relation to the VAT treatment of historic searches.
