Vat Legal Costs

In the meantime, however, HMRC has brought another case before the First-Tier Tax Tribunal (Brabners LLP v The Commissioners for Her Majesty`s Revenue & Customs [2017] UKFTT 0666). Brabners concerned electronic property searches. In that case, the court ruled in favour of HMRC when it found that the cost of obtaining the company`s electronic property searches had been incurred as part of its own services to the client and as part of this overall service. As a result, the company was unable to treat fees paid to a third-party research organization as payment. The court judge in Brabners found that the electronic property searches in question had been conducted at the law firm, which was using them as part of its own overall provision of legal services to the client. This means that these costs cannot be treated as expenditure for VAT purposes. The court may order a party to a dispute to pay the costs of the other party. As a rule, this is the party in favor of which the winner was decided. This is a contribution to the winner`s costs for filing the claim. The amount of this contribution can be: This guide is intended for all lawyers and their legal tellers who must handle the invoicing, making and receiving payments including VAT. You don`t have to follow them.

It is neither legal advice nor a defence to complaints of misconduct or inadequate professional services. The Law Society accepts no legal responsibility in this regard. In deciding how much the losing party must pay to the winner, the court will take into account the VAT charged to the winner by his lawyer. The amount awarded constitutes a contribution to the costs incurred by the successful candidate in bringing the appeal. If the action served the winner`s taxable business and there is a right to a refund of input VAT, the court will not order a contribution to VAT. recover part of the VAT from HMRC, only the part that cannot be refunded by HMRC must be included in the reimbursement of costs Some legal services are subject to special rules concerning the VAT treatment of their fees; Expenses and expenses. These legal services include, for example, lawyers, lawyers, legal researchers or legal representatives. If a third-party service is provided to you solely to enable you to provide services to your customer, the cost of that service cannot be treated as payment for VAT purposes.

This is because the service is part of your own legal services to the client. If the purpose of the legal services related to the customer`s business (e.g. the purchase of business premises) and the customer is registered for VAT, the customer may be able to recover the VAT you charged, but in other cases the customer will have to bear the additional costs. Your client has no legal entitlement to an input tax credit because the opponent`s lawyer did not provide legal services to your client. Based on Brabner`s and BA`s decisions against Prosser, HMRC may argue that the fact that you have used the search results or copies of documents to give advice or certificates means that the provision of the search result is a delivery to you and that the costs should therefore be treated as fees for part of your legal services and are subject to VAT at the standard rate. instead of being treated as a payment, regardless of whether VAT was collected by your supplier or not. The court rejected HMRC`s view that these reports were part of the overall legal services from the lawyer to the client. He considered that the lawyer`s obtaining reports from third parties on behalf of the client was distinct from the solicitor`s use of the reports to provide additional advice (for which the solicitor charges separately). HMRC did not appeal the court`s decision. VAT does not have to be charged if the person providing the legal services is below the VAT registration threshold and HMRC believes that if a lawyer has used the research to provide additional advice to the client, this is considered an integral part of the lawyer`s legal care and therefore cannot be treated as payment. This means that you will have to charge VAT if you charge these costs to the customer.

This increases the cost to the customer if the search fee is not subject to VAT. Other guidance provides more detailed information on these rules for each type of legal service provider. This guide replaces our previous practical guide on VAT on withdrawals. It provides less detailed guidance on specific areas of legal practice due to the challenges arising from these decisions. However, it does provide more detailed practical advice on VAT and payments in the real estate context. A payment classified as an eligible payment may be charged to your client as an amount that includes VAT (if taxable) and excluded from the calculation of VAT due for your provision of legal services to your client. This practical note explains the specific provisions relating to VAT in relation to costs which are the subject of a summary or detailed assessment before the High Court.