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Withdrawal of VAT-free disbursement treatment for postal searches

Withdrawal of VAT-free disbursement treatment for postal searches

09/06/2020
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HMRC has given notice that it is withdrawing the concessionary treatment for postal searches with effect from 1 December 2020. This development will be relevant to solicitors and conveyancers that obtain property searches by post.

What is the ‘postal concession’?

The ‘postal concession’ has been a long-standing concession agreed between HMRC and the legal profession. It allows solicitors and conveyancers not to charge VAT on the recharge of the fee for property searches conducted by post, even though not meeting all the disbursement conditions set out in HMRC’s guidance.

Why is it being withdrawn?

In a move that is not wholly unexpected, the concession is being withdrawn from 1 December 2020 to remove the inconsistency in treatment between online and postal property searches.

Recent case-law decisions in the Brabners and British Airways cases found that where the solicitor or conveyancer uses the search results in making their own supply of professional services, the property search is a cost component of that supply, rather than a disbursement. Therefore the recharge to the client was subject to VAT in line with the VAT treatment of the legal services.

HMRC has also announced that updated guidance on VAT and disbursements will be provided after the withdrawal of the concession for postal searches. View HMRC’s policy paper.

Get in touch

For more information on VAT and disbursement charges and developments over the past few years read our article from October 2019, law Society replaces guidance on VAT and disbursements or get in touch with your usual Crowe contact.

 

Contact us

Robert Marchant
Robert Marchant
Partner, VAT
London