Further to our recent article on search fee disbursements and the case involving Brabners, there have been further developments in respect of the VAT treatment of search fees.
It was hoped that meetings between the Law Society and HM Revenue & Customs (HMRC) would provide clarity on how HMRC intends to approach the VAT treatment of electronic property searches in future.
However, HMRC has confirmed that they do not intend to change the approach set out in their published guidance as to whether a property search fee should be treated as a disbursement for VAT purposes i.e. if the search is passed on to the client without comment or analysis, HMRC says the fee may be treated as a disbursement. However, if the firm uses the search itself, for example in providing advice, or a report, HMRC’s view is that the fee will form part of the charges for its services and will be subject to VAT.
HMRC are prepared to allow solicitors to treat postal search fees as disbursements so that VAT will not be payable on the amount of the fee… but HMRC has acknowledged the need to review the position in respect of the postal search concession.
It is disappointing that this matter has not been clarified and affected firms may remain uncertain as to how to treat supplies in this area for VAT purposes
If you would like to discuss the effect that this or any other VAT matter may have on your business, please do not hesitate to contact one of our team.