MHA Moore and Smalley’s new appointment strengthens Corporate team in Liverpool

We’re pleased to announce the appointment of Richard Fraser as a Corporate Client Services Manager in Liverpool.

Richard joins MHA Moore and Smalley after 35 years at local firm DSG, where he was a Corporate Business Manager.

Richard will strengthen our team with his specialism in working with legal practices. His extensive experience and expertise will be a valuable addition to our Professional Practices team who have a proven track record in working with some of the region’s most prominent law firms.

Richard said:

“I chose MHA Moore and Smalley as they have a reputation for being a friendly organisation and are well regarded and respected within the profession.  I’m delighted to be joining the team and look forward to my future with the firm.”

If you would like to get in touch with our new Corporate Client Services Manager, please use the contact details below:


T: 0151 318 9201

VAT and solicitors’ disbursements

In June 2020, HMRC released their Revenue & Customs Brief 6 (2020) in respect of the VAT treatment of property search fees charged by solicitors and conveyancers.

This confirmed the withdrawal of the ‘postal concession’ from 1 December 2020. This concession allowed solicitors and conveyancers not to charge VAT on fees for property searches conducted by post, even where the disbursement conditions were not met. This is a further consequence of the VAT tribunal decision in Brabners LLP, where it was confirmed that electronic (online) search fees were not disbursements. This was because the searches in question were supplied to the law firm which then used them as part of its own overall supply of legal services to the client. In this situation the costs could not be treated as disbursements for VAT purposes.

You may find it helpful to have a reminder of the conditions for disbursements, as detailed in the VAT Notice 700.

You may treat a payment to a third party as a disbursement for VAT purposes if all the following conditions are met:

  • you acted as the agent of your client when you paid the third party
  • your client actually received and used the goods or services provided by the third party (this condition usually prevents the agent’s own travelling and subsistence expenses, phone bills, postage, and other costs being treated as disbursements for VAT purposes)
  • your client was responsible for paying the third party (examples include estate duty and Stamp Duty payable by your client on a contract to be made by the client)
  • your client authorised you to make the payment on their behalf
  • your client knew that the goods or services you paid for would be provided by a third party
  • your outlay will be separately itemised when you invoice your client
  • you recover only the exact amount which you paid to the third party
  • the goods or services, which you paid for, are clearly additional to the supplies which you make to your client on your own account

The difficulty for solicitors is that they may meet the cost of statutory charges on behalf of clients, act as co-ordinators in relation to client transactions or even incur costs themselves that they can attribute and recharge to clients. It is therefore important that solicitors carefully consider whether the disbursement conditions are met in each situation, should they wish to treat costs as disbursements when charging clients. Getting it wrong could prove costly.

Contact Us

If you would like further information about this topic, please contact Steve Forster, Indirect Tax Senior Manager on 01772 821 021 or email

Legal Sector Survey Results 2021

Now, for tomorrow 

In May 2020 and December 2020, the MHA Professional Practices team ran two separate surveys looking at the impact of COVID-19 on the legal sector and how it has influenced future plans. 

We have analysed and compared the results of the two surveys and developed four easy-to-read infographics which go into detail about the key statistics and what it means for the sector.  

The results report on the following areas: 

  • Fees and Profitability including the impact on fee income, best and worst billing service lines and the change in profit levels.  
  • Staffing including recruitment, redundancies, and office vs remote working. 
  • Cash flow including lock up, work in progress (WIP) and debtors.  
  • Business strategy including key changes and what firms are prioritising in 2021.

You can use this information to benchmark your practice against others nationally, as well as looking at the next steps you should be taking. 

Fees and Profitability

What has been the impact of COVID-19 on fee income?

Our last survey asked Firms to estimate what impact Covid-19 was having on fees billed. Now that we are 9 months post original lockdown, Firms have reversed a “major” impact expectation to an actual “minor” impact on fee income.



73% of survey respondents have recruited staff since March 2020. The more flexible working practices developed during the March 2020 lockdown have opened the staff market place, and geographical boundaries and long commute times have reduced in importance.

Cash Flow

Business strategy

Find out more

Each week we will be releasing our detailed review so please visit this page frequently to see the latest published results. If you would like to discuss the results in more detail, please contact our professional practice partner Karen Hain on 01772 821 021 or email

VAT, early termination and dilapidations payments – impact on leases

In September 2020, when Brexit seemed a distant event and we were still able to eat out at our favourite restaurant, HMRC released Revenue & Customs Brief (“RCB”) 12 (2020) titled “VAT early termination fees and compensation payments”. It followed two judgements of the Court of Justice of the European Union (CJEU). In these decisions, the CJEU held that when customers are charged to withdraw from agreements to receive goods or services, these “termination fees” are considered as further payment for the supply of goods or services to the customer. The fact that payments may be categorised as contractual penalties or compensation under national law was irrelevant. It follows that most early termination and cancellation fees are liable for VAT. The reason why this is significant is because HMRC had previously accepted that these charges were not in respect of a supply and therefore were outside the scope of VAT.

HMRC has now announced that it is revising RCB 12 (2020) and this revised guidance is expected shortly. HMRC have also confirmed that its guidance will be implemented from an as yet unspecified future date.

We understand that the revised RCB will, in broad terms, confirm that they consider that early termination and similar payments will be consideration for a supply if they form a cost component to the supplier of making the intended supply available or are broadly equivalent to what would have been charged for that supply. Where a charge is made which is provided for in a contract, but which is not directly linked to the intended supply, it will be outside the scope of VAT. However, we understand the RCB will specifically provide clarification in respect of dilapidations payments made under a contract for lease of a property, as detailed below.

These payments are further consideration for the supply where the work is to make good use permitted under the contract. There is a direct link between the payment and the supply, and there is reciprocity as the tenant has signed up to return the property in the condition they obtained it. If the tenant had gone beyond what was permitted under the contract then the charge to rectify this would be outside the scope. It would not be for the supply as the landlord had not agreed to the usage and so the necessary reciprocity would not exist.

Below are other examples of where VAT is likely to be applicable to payments.

  • The contract is terminated but there is a clause in the contract requiring the customer to pay the remaining fees.
  • There is no pre-existing right to terminate in the original contract for a taxable lease but both parties agree to a variation to the lease, setting out terms for early termination and a sum to be paid to the landlord as compensation.
  • Early upgrade fees are a type of early termination fee and are treated in the same way.
  • Lease agreements for moveable goods commonly include clauses that allow lessees to terminate early but to pay liquidated damages as a result. For example, vehicle finance leases that customers can cancel after an initial period of hire but, if so doing, must pay a termination fee to cover the loss of future rents.
  • It is also possible for leases and other agreements to terminate early if a particular event occurs such as the customer breaching the terms of the lessor or an associate business calling in receivers. Contracts may say such events cancel their terms or effectively allow the lessor to terminate as though there had been a breach and require a fee to compensate the lessor.

We await the revised guidance but, in the meantime, HMRC has confirmed that businesses can either:

  • continue to treat payments that fall within the RCB as further consideration for the contracted supply, or
  • go back to treating them as outside the scope of VAT, if that is how they treated them before the RCB was issued​.

Contact Us

If you would like further information about this topic, please contact Steve Forster on either 01772 821 021 or email

Solicitors’ PII – 1 October renewal in progress

The insurance market is now open for the 1 October renewal of solicitors’ professional indemnity insurance (PII).  This is a challenging renewal for law firms given the combination of a hard market and the impact of Covid-19.

The majority of law firms still renew their PII on 1 October and are currently engaged in the process of completing proposal forms and sourcing quotes. Firms that renew their PII on other dates will also be watching developments closely, so that they know what to expect when it is time to renew their cover. This is the story so far:

  • It has been a slow start to the renewal process with insurers taking time to settle changes to their proposal forms and produce questionnaires related to the impact of the Covid-19 pandemic. Some insurers have also taken more time than expected to settle their rates, which has likewise contributed to delays. Firms that have not yet completed their proposal form should do as a priority. It is important to remember that the future of your firm depends on your PII renewal.
  • Proposal forms are longer this year and will take more time to complete. We have seen an increase in questions directed towards buyer-funded developments and other property investment schemes. The claims activity arising from these transactions is a particular concern and insurers are keen to understand the extent to which firms have engaged in this work.
  • Most insurers have also introduced additional questionnaires relating to the impact of Covid-19. The questions cover issues such as the effectiveness of contingency plans, risk management initiatives adopted to respond to remote working, staff arrangements, cyber security and the financial position of the firm
  • The financial stability of firms is a key issue for insurers this year. They are particularly concerned at the prospect of firms failing in the next 12 months which will trigger the requirement to provide run-off in the event that a successor to the firm cannot be found. Insurers are obliged to provide the cover whether or not the firm is able to pay for it. Firms can expect that the financial information they provide will be scrutinised more closely than it has been historically.
  • As far as premiums are concerned, this is the hardest market for solicitors’ PII since the profession moved their insurance arrangements from the Solicitors’ Indemnity Fund to the open market. Firms that have yet to receive a quote should prepare themselves for an increase in premium.

The Law Society president, Simon Davis, has recently been quoted in the legal press saying that firms should expect increases of up to 30%.

However it is not a case of “one size fits all”. Every firm has its own unique characteristics and premium increases will differ depending upon issues such as a firm’s areas of practice and claims history. Insurers will also differ in the rate increase that they need across their portfolio. It is important for firms to engage with their broker to discuss the potential premium increase to expect.

  • Insurers have a reduced appetite for new business, particularly when it comes to firms that engage in conveyancing work – which is the majority of the profession. Insurers are nervous, due to both the existing claims from conveyancing work and the prospect of further fall-out following a crash in the property market as a result of Covid-19 and Brexit. Some insurers are not prepared to consider new business cases where the firm undertakes more than 20% conveyancing. This means that it can be very difficult to source an alternative quote for a firm that wants to compare the terms offered to them by their existing insurer with a quote from another insurer.
  • It is expected that there will be an increase in firms wanting premium funding arrangements, given that there is more pressure on cash-flow than there has been historically. Premium funders are also asking more questions as a result of Covid-19 issues and firms should expect that there will be rigorous scrutiny in advance of funding being agreed. Again it is important that firms allow enough time for this part of the process and start to consider their options as soon as possible.

As a broker we are acutely aware of the difficulties that the profession faces with regard to the current PII renewal. We recommend that firms stay engaged with their broker, respond promptly to any requests for further information and ensure that they provide insurers with the best possible presentation of their firm. As discussed above, financial stability is a key issue and firms should ensure that they engage with the appropriate professionals if assistance and advice with regard to the financial position of the firm is needed.

This article was produced in collaboration with Jenny Screech, Consultant from Howdens

If you are interested in discussing anything covered in this article please make sure to get in touch with a member of our professional practices team on 01772 821 021 or email your inquiry to

MHA Legal Sector COVID-19 Survey Report

Towards the end of May 2020, whilst still in the midst of the COVID-19 lockdown period, MHA undertook a survey of the legal sector focusing on the impact of coronavirus, how this is affecting law firms, and the influence on future plans.

Following the headline results we shared in June 2020, we have developed a short report which goes into more detail of the findings and further key statistics.

The report focuses on 7 key sections, including fee income, cash flow, business strategy and working practices going forward, and answers crucial questions such as:

  • How are law firms changing their current business strategy and what are they focusing on?
  • What have we learned from home working?
  • How will we change our working practices going forward?
  • What has been the impact on fee income and what should firms be thinking about now?

You can use this report to benchmark your practice against others nationally, as well as looking at the key next steps and action points that you should consider going forward.

To download a copy of the report please click here.

If you would like any further information on any of the topics, please contact Karen Hain on 01772 821021.

UK legal firms planning major changes following pandemic, suggests MHA survey

More than two thirds of legal firms will review their business processes and well over half are planning a major change in strategy following the COVID-19 pandemic.

That’s according to a survey of more than 100 UK law firms of all sizes conducted by MHA, a UK-wide association of independent accountants and business advisors.

The survey, carried out during lockdown, showed that 85% of firms said the pandemic would have a ‘moderate’ or ‘major’ impact on fee income. Almost one in five (19%) of those surveyed have seen fees drop by more than 30%.

However, 59% of firms said they will use the opportunity to change their business strategy with a focus on better IT, review of specialisms, and improving profitability.

In a sign that firms are ready to embrace more agile working, 63% of firms surveyed said they found the transition to homeworking during the pandemic ‘easy’ or ‘very easy’, and 81% said they expect to allow staff to work part of the week from home in future.

Karen Hain, head of the Professional Practices team at MHA and Partner at MHA Moore and Smalley, said: “Like many other sectors, legal firms will be hit financially in the short term by the pandemic, however, there’s also a huge opportunity to use this as a catalyst for modernisation and achieving longer term financial stability.

“When it comes to business strategy, many firms have been telling us that the pandemic has encouraged them to take action to remove high-risk areas of work and to change their focus from increasing fee income to increasing profitability.

“There’s clearly a huge opportunity around staff recruitment and retention due to the agile working practices we’ve all become used to in a very short space of time. This may enable some firms to staff the business and attract new work without geographic restriction.”

Among the other key findings of the survey were:

  • 68% are reviewing their current premises requirements or considering smaller offices
  • 87% of firms have made use of the Coronavirus Job Retention Scheme (CJRS) and 31% accessed the Coronavirus Business Interruption Loan Scheme to date
  • 68% have deferred VAT payments and 31% have used the HMRC Time to Pay arrangement
  • 66% are changing their plans for investment in IT systems and procedures to allow more homeworking
  • 61% have changed their recruitment plans
  • 40% said they are changing their plans to focus on credit control and tightening up requests for advance payments on account from clients

Karen added: “This has been a big reset moment for the legal sector and there’s definitely opportunities for those firms who can move quickly to take advantage of new profitable business generated online or from non-traditional routes or regions. Those firms who are looking forwards, taking positive lessons from lockdown, and making decisions to change, based upon a modern IT infrastructure, will be those to profit not just survive.”

An infographic summarising the main findings of the MHA Legal Sector Covid-19 survey is available here.

Legal Sector COVID-19 Headline Survey Results – How does your practice compare?

MHA undertook a survey into the legal sector focusing on the impact of COVID-19, and how this is affecting law firms. The results report on 8 key areas including fee income, business strategy now and for the future, and working practices now and going forward.

We have summarised the results in an easy to read infographic which can be found here. The main headlines include:

  • 85% of firms said that COVID-19 has had a ‘moderate’ or ‘major’ impact on fee income
  • Once lockdown is lifted, 81% of firms expect staff to continue to work from home, with 50% stating that they expect staff to work up to 2 days a week from home going forward
  • The largest proportion of survey respondents (24%) furloughed between 21% and 30% of staff across their firms.
  • 82% of legal firms are reviewing their cash flow forecasts either daily or weekly.

We will be producing a more detailed report on the survey findings over the coming weeks. However to see the headline findings please click here.

However, if you have any questions in the meantime, or would like to discuss the results in more detail, please contact Karen Hain.

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.

What next?

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.