The VAT postal concession will be removed from 01 December 2020 after it was ruled that the relief is no longer consistent with the new, narrower interpretation of disbursements.
The change comes after a landmark ruling in the Brabners LLP case, which centred around the VAT treatment of electronic property searches.
Handing down its decision earlier this year, the First-tier Tax Tribunal found that electronic property searches were “supplied to the law firm which used them as part and parcel of its own overall supply of legal services to the client”, meaning that these costs could not be treated as disbursements for VAT purposes.
But as the postal concession also enables solicitors to treat fees for local authority searches obtained by post as “disbursements” for VAT purposes, it must also be removed to comply with the new interpretation.
Commenting on the changes, the Law Society for England and Wales said the ruling “has cast doubt on some established practices of solicitors around client invoicing”.
“It is difficult to discern the correct limits of the reasoning in Brabners and to determine how it should be applied in real situations.
“In withdrawing the concession, HMRC states that allowing fees for postal searches (which are now very uncommon) to continue to be treated as VAT disbursements in all cases is inconsistent with the decision in Brabners.”
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