VAT treatment of property search fees charged by solicitors and conveyancers
HMRC have announced the formal withdrawal of the ‘postal concession’ with effect from 1 December 2020.
What is the postal concession?
The postal concession was agreed between HM Customs and Excise and the Law Society in 1991. It allowed conveyancing solicitors to treat property searches conducted by post as disbursements, so that VAT did not have to be charged by the solicitor to the buyer of the property.
Why has this changed?
In 2017, the law firm Brabners LLP lost a VAT case before the First-tier Tribunal that online search fees should be treated as disbursements. Following a consultation process, HMRC have justified the withdrawal of the postal concession on the grounds that postal and online searches need to be dealt with on a consistent basis. HMRC also feel that postal searches are largely obsolete and that the concession serves no useful purpose.
HMRC state that further guidance will be issued on the treatment of disbursements more generally, following withdrawal of the concession on 1 December 2020. Watch this space!
If you have any questions, please contact Jonathan Main on 07760 166802.