HMRC is contacting law firms regarding the VAT treatment of electronic searches
The Law Society has revealed that some law firms have recently received letters from HMRC regarding the VAT treatment of electronic searches.
This is likely to have been triggered as a result of the recent Tribunal decision in Brabners LLP whereby the law firm has been ordered to pay a substantial VAT bill after it was concluded that electronic property search fees are not disbursements. This decision raised certain ‘inconsistencies’ within HMRC’s current guidance and so a review of the guidance may become necessary.
In the meantime, due to the complexities that clearly arise with VAT on disbursements, we urge any firm that has received such a letter from HMRC to contact us. Alternatively, if you are a law firm and have not received a letter, or you have clients within the legal sector and you would like further information on disbursements, please get in touch with one of the team at Centurion VAT Specialists.