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Tax – VAT

Conveyancing - disbursements

It is important to ensure that conveyancing disbursements (in particular, standard search fees) are disbursements, and thus VAT does not have to be charged on them to the client.

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Salary sacrifice - changes

New rules on salary sacrifice schemes come into force on 1 January 2012.

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'Compensation' - not a supply

A compensation payment will not be VATable (being regarded as damages or liquidated damages). Interestingly, it is possible for ongoing contractual payments to be regarded as 'compensation' (rather than contractual payments for the provision of services).

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New build - planning permission

Zero rating applies to the construction of new dwellings. In practice, it is vital to ensure that the planning consent is properly worded so as to ensure it is a new build - as opposed, for example, to a rebuild of an existing property. Otherwise, there will be arguments over whether it is a genuine new build (and clear evidence of the building being taken down to the foundations or slab will be needed).

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Break clause - penalty payment

Suppose a commercial T has a break clause which allows him to break the lease on payment of a penalty to L (eg three months rent). Will that penalty payment be subject to VAT (or will it be treated in the same way as the rent - and thus be VATable if it is a VAT-elected property)?

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Service charges - VATable?

Are service charges VATable?

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Disbursements - conveyancing

HMRC's view as to what is a disbursement for VAT purposes is different from that of the Law Society. In particular, HMRC puts strong emphasis on its requirement that (i) you must have acted as the agent of your client when you paid the third party, and
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Solicitors – disbursements

In 2008, HMRC argued that personal injury clients should pay VAT on the cost of medical reports obtained by their solicitors. This was against the established principle that the report fees were disbursements, with the solicitors acting as agents for their clients.

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Third-party costs – any benefit?

Recovery of VAT on third-party costs is a difficult and technical area of VAT. The basic principle set out in Redrow [1999] is that the person paying VAT must make business use of the service being supplied, in order to be able to recover the VAT. 


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Employees – bike schemes

Two recent developments have made ‘cycle to work’ schemes less attractive. 


Firstly, the ECJ has held that employers have to pay VAT on the benefit provided to the employees under salary sacrifice schemes (see our separate entry). As far as ‘cycle to work’ arrangements are concerned, those will generally involve the employer buying a bike for the employee to use to commute to work, funded by salary sacrifice.

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Most-read articles

Trustees – duty to beneficiaries
Wednesday, 11 July 2018
Trustees cannot simply ignore beneficiaries’ request for information about a trust, the High Court has held. In this case, the trust property was a farm outside Cardiff. Read more...
Conveyancing searches – disbursements?
Wednesday, 11 July 2018
Should electronic property searches be treated as disbursements for VAT purposes? Alternatively, are they part of the legal service provided, and so subject to VAT? Read more...
Professional – update
Wednesday, 11 July 2018
From December 2018 there will be new rules requiring firms to publish prices for conveyancing, probate, motoring offences and immigration, as well as the price for bringing ET claims.  Read more...
Service mistake – discretion?
Wednesday, 11 July 2018
To what extent do you have a duty to point out the other side’s procedural errors (as part of your obligation to comply with the ‘overriding objective’)? Read more...
Exiting the Portal – reasonable
Wednesday, 11 July 2018
Insurers should be very careful about making allegations (for instance, at Stage 2 of the EL/PL Protocol), especially if they could be interpreted as allegations of ‘dishonesty’. Read more...
Airbnb – breach of lease
Wednesday, 11 July 2018
It now seems clear that an Airbnb short let will be in breach of a typical long lease. Read more...
GDPR – data rooms
Wednesday, 11 July 2018
If L is planning to sell a property subject to leases, then almost certainly a data room will be set up containing all relevant documents. Read more...
Rights of way – public
Wednesday, 11 July 2018
There are four categories of public rights of way: Read more...
Financial remedies – company assets
Wednesday, 11 July 2018
A recent ruling illustrates when a court can treat a company-owned asset as as a matrimonial asset. Read more...
GDPR – references
Wednesday, 11 July 2018
GDPR impacts on the giving of references: Read more...

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