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Law Society guidance on VAT treatment of electronic searches

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The Law Society has updated its guidance on when property search fees may be treated as disbursements for VAT purposes, or as part of the overall consideration given for legal services. This takes account of the FTT decision in Brabners LLP [2017] UKFTT 666 and obiter comments in the more recent Court of Appeal judgment in British Airways v Prosser [2019] EWCA Civ 547.

In May 2018, the Law Society’s advice was to follow HMRC’s published guidance, although it remains concerned that the narrow interpretation of disbursements used by HMRC and the courts causes difficulties for solicitors in practice. The Society’s revised guidance is less detailed on specific areas but provides some more detailed practical examples.

The Law Society notes that firms may have taken a variety of positions ‘for entirely honest and justifiable reasons’ and regards it as sensible if they ‘take a conservative approach to classifying items as disbursements going forward’.


Issue: 1461
Categories: News