VAT: property search fees

HMRC has announced the withdrawal of the concessionary VAT treatment for property searches conducted by post, with effect from 1 December 2020.

The concession allows solicitors and conveyancers to treat postal property search fees charged to their clients as disbursements. This means they are not required to include the search fees in the value of their supplies for VAT purposes. In Brabners LLP [2017] UKFTT 666 (TC), the First-tier Tribunal agreed with HMRC that online search fees were not disbursements. The postal concession therefore results in a confusing difference in VAT treatment between postal search fees (which can be treated as a disbursement) and electronic search fees (which generally cannot).

Revenue and Customs Brief 6/2020: VAT treatment of property search fees charged by solicitors and conveyancers aims to remove this inconsistency in treatment and allay some of the confusion over whether costs can be treated as VAT disbursements (HMRC’s views on which are set out more generally in VAT Notice 700, para 25.1).