Disbursements for Solicitors
HMRC have announced the formal withdrawal of a concession which allowed solicitors to treat property searches by post as a VAT-free disbursement when recharged to clients. The change takes effect from 1 December 2020.
Given that paper searches are rarely performed this announcement is really concerned with hammering home HMRC’s views on the correct VAT treatment of disbursements more generally. Their approach to this was emphasised by their success in the First-tier Tax Tribunal in Brabners LLP v HMRC.
The Law Society issued revised guidance for law firms on the impact of that decision on February 5, 2020. The guidance acknowledges that HMRC’s approach to the VAT meaning of a disbursement may differ significantly from the way in which the term is generally understood by Solicitors.
All firms must carefully reevaluate their policy or risk conflict with HMRC and potentially damaging assessments for VAT, interest and penalties.
Read our Focus On information sheet which covers areas such as:
- What is a disbursement for VAT purposes?
- What are the benefits?
- What has changed?
- What action is required?
How we can help
We can assist with a review of your invoicing procedures. We also offer bespoke training for Finance Teams within firms covering VAT issues specific to the sector including disbursements, time of supply, third-party settlements, case transfers, cross-border issues and purchase ledger risks.