Concessional treatment of postal searches as disbursements for VAT to end on 1 December 2020.

Fri 19 Jun 2020

The ‘postal concession’ was informally agreed between HMRC and the legal profession in 1991. It allows solicitors and conveyancers not to charge VAT on fees for property searches conducted by post, even though not meeting all the conditions to be disbursement for VAT purposes.  HMRC’s Brief 6/2020 announces that the concessional treatment of postal search fees as disbursements will cease from 1 December 2020. 

HMRC indicates that this is because the concessional treatment for postal searches, which are now quite rare, is out of line with the policy on the VAT treatment of electronic search fees.  The treatment of electronic search costs became apparent following a First-tier Tribunal decision in a case involving Brabners LLP, it became clear that electronic property searches incurred by solicitors and conveyancers, could not be treated as disbursements for VAT. 

Identifying disbursements for VAT purposes, or those costs passed on for which VAT needs to charged, is not always easy.  Please get in touch with a member of the Mazars indirect tax team for a further discussion of the impact of this issue for your business.