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Disbursements and VAT Treatment

During the course of your transaction, in some cases, we will send you a Completion Statement as well as an Invoice. For those of you who are not new to the firm, upon perusal, you will note that the format of our completion statements and invoices has changed, and now show VAT as chargeable on certain disbursements which were not previously subject to VAT. Recent guidance provided by the Law Society will affect the way all law firms charge VAT on their disbursements and so it is not an issue unique to us in any way – it is purely a result of recent developments; as well as Law Society and HMRC guidance issued in certain cases that have appeared at the First Tier Tax Tribunal and Court of Appeal.

What counts as disbursement?

Broadly speaking any payment made to a third party in connection with the matter we are dealing with for you is classed as a disbursement. The Solicitors Act 1974 refers to them as “costs payable in the discharge of a liability properly incurred by him on behalf of the party to be charged with the bill”.

HMRC require a specific set of criteria to be satisfied for a payment to be treated as a non-VATable disbursement.

What is the new position?

The rules on what is a “disbursement” have not changed but the interpretation of the rules has been narrowed following the recent cases. Recently, all law firms were issued with new guidance from the Law Society that seeks to provide some real clarity.

We have now been advised to take a very narrow view of what is classed as a “disbursement”. Anything that can be deemed as being part of the services provided to you is now classed as a VATable disbursement. This contrasts with a straightforward repayment of a third-party service supplied to the client.

Some key examples of changes which you may have noticed in our invoicing are as follows:-

Land Registry official copy documents: The Land Registry does not charge VAT on its fees for providing copy title documentation. However, we will now be charging VAT when we pass on those fees as we review the documents to advise and report to you.
Land Registry priority searches and land charges search: these searches are undertaken at the Land Registry on most transactions that will require a Land Registry application. The Land Registry does not charge VAT on its fees for providing these searches, but we will now be charging VAT when we pass on those;
Other Property searches including Land Charges (LLC1): where official search results are provided by the Local Authority, the said Local Authority does not charge VAT on the Local Land Charge element of the search fee. We are now required to charge VAT when we pass on the costs of those elements where VAT is not chargeable.

How does this affect you?

If you are VAT registered and the services we provide to you are during the course of your business dealings, then, subject to your Accountant’s advice, you should be entitled to claim the VAT back through your VAT returns. Our invoices will detail those disbursements on which you have paid VAT and so it is simply a case of some paperwork and a cash-flow consideration.

If you are an individual not obtaining services in the course of business or are not VAT registered, unfortunately, the VAT will be an additional cost to you.

Rest assured, if the third-party provider already charges VAT on its fees already, then you will not see any change in the total costs of those disbursements. For example, most property searches are already subject to VAT by the search provider and in those cases, the total cost will remain the same, but our presentation of the information on your completion statement and invoice will be different.

George Ide LLP. We’re on your side

Contact our team

For further information about any of our services or to book a no-obligation consultation, call us on 01243 786668 or email directly at info@georgeide.co.uk.

Nicholas Smith | Partner

Head of Residential Property

01243 813535 nicholas.smith@georgeide.co.uk

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Maddie Carty | Licenced Conveyancer

01243 831008 maddie.carty@georgeide.co.uk

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Rosie Morris | Chartered Legal Executive

Residential Conveyancing

01243 971566 rosie.morris@georgeide.co.uk

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Krystin Frame-Maroulis | Paralegal

Residential Property

01243 971652 krystin.frame@georgeide.co.uk

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Client Testimonials

You have been a pleasure to deal with and have been so competent, patient, organised and professional. I still cannot believe how stress-free the whole procedure was with you. In stark contrast, I completed today on my house in N Ireland after five (!) months of legal wrangling. I am delighted with the house and, although still surrounded by packing boxes, am making progress. Once again. Thank you for all you did. Kind regards,

Elaine Young

Nicholas Smith

Splendid service from Maddie, who was always happy to explain any questions we had, replying promptly and in plain English! She also proactively made sure at several stages in the process, that in light of her most recent clarifications, we were still happy to proceed.

Alan Diverall & Tracey Kent

Maddie Carty

Nicholas Smith was highly professional, focused and responsive. He worked to a very tight timetable to
complete the purchase of our house and I would strongly recommend him to prospective clients

Robert & Nathalie Forman

Nicholas Smith

I would like to take the opportunity to thank you and your team for your friendly and efficient manner when carrying out the conveyancing of my late Grandmothers property. Other than the delays caused by our buyers it went very smoothly and I am grateful to you for pushing it through so quickly once their issues had been resolved and have pleasure to attach our client satisfaction questionnaire. Kind regards

Jon Sargent

Nicholas Smith

Maddie was brilliant in the way she handled everything. She’s a gem. I know it’s been a very rough ride, we can’t say thank you enough.

Sarah & David Gomez

Maddie Carty

We want to say a very big thank you to both of you for all your help in our house moves. We have been very impressed with your highly efficient, no fuss approach to the conveyancing. It has made the whole process so much easier for us and we would have no hesitation recommending your services to others.
Best wishes and thank you once again.

Tony &Joanne Heys

Nicholas Smith

Excellent service again – even better than last time. I was particularly impressed and grateful for the very speedy email communications; they were always prompt but also importantly, they were succinct. I was also pleased at the help given in distilling the important considerations and that Nick identified a major issue with the title very early on in the process.

Mike Smith

Nicholas Smith

The speed from offer to completion surprised everyone we spoke to and more than met our deadline to beat the June Stamp Duty deadline. Well done, absolutely delighted.

John Middleditch

Nicholas Smith

For the sale and purchase of our properties we found the service we received throughout the conveyance to be exemplary. A clear, efficient and professional service from Nicholas Smith and his team.

I would look no further for any future property conveyance and as a result of this experience with George Ide I will consider them, first and foremost, for future legal matters.

Ian & Susan Archer

Nicholas Smith

“Just a very quick, but nonetheless very sincere and heart-felt thanks on behalf of J and myself for your highly professional and sympathetic help in the house sale/purchase saga – you certainly saved our respective sanities on several occasions when your wise words proved to be the right course of action.”
Mr T

Nicholas Smith

A friendly, helpful and competent service close to home and we felt welcome, relaxed and confident in their hands. Thank you all.

Egon & Pamela Frey

Nicholas Smith

Nick was always very quick to respond to any queries and made the whole process a lot less stressful, especially as it was my first property purchase. Guidance documentation was very helpful too. I can’t fault the service.

Teresa Durrant

Nicholas Smith