In June 2020, HMRC issued Revenue and Customs Brief 6 (2020) ‘VAT treatment of property search fees charged by solicitors and conveyancers’ confirming the withdrawal of the concession on the VAT treatment of property search fees obtained by post from 1 December 2020.
The VAT treatment of property search fees and when they may be treated as Disbursements has been a contentious issue for some time following the case of Brabners LLP v HMRC [2017] TC06093.
Historically HMRC applied concessionary treatment to postal search fees, agreeing they could be treated as disbursements, meaning that solicitors who on charge the costs to their clients do not have to charge VAT. The brief announces the withdrawal of this concession from 1 December 2020.
This does not affect the VAT liability of local authority or HM Land Registry search fees which, following the Brabners case, are also not disbursements as they are part of a solicitor’s services meaning that VAT must be charged accordingly.
Useful guides on this topic
Disbursements
What are disbursements? When is a recharged cost outside the scope of VAT? How do you account for VAT if you are acting on behalf of someone else?
Agents and principals
What is an agent for VAT purposes? What is a principal? When do the agency rules apply?
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