Brabners, a commercial law firm based in the North of England, has been ordered to pay £68,000 in VAT for local authority property searches it performed using SearchFlow.
The Tribunal ruled that the searches were vatable as Brabners used the results as part of its service to clients, they weren’t just collecting the fee from the client.
From May 2012 to June 2015 Searchflow invoiced Brabners for the cost of the search without VAT, which was standard practice. Tribunal Judge Dr Christopher McNall commented:
“Until early 2017, local authorities did not routinely charge VAT for searches, on the basis that it was charging simply for access to the documents”
Brabners treated this as a disbursement and invoiced its clients without VAT.
The Law Society’s Take
Christina Blacklaws. The Law Society vice president said:
‘Members will be aware of the First-tier Tax Tribunal decision in Brabners LLP v HMRC in which the Tribunal concluded that the act of obtaining electronic property searches from a search agent formed part of the overall service provided by a firm to it’s client on the basis that the searches enable the solicitor to advise and therefore, the fees for those searches could not be treated as disbursements for VAT purposes.’
DPS – How we are dealing with this
DPS have worked tirelessly to ensure our clients can cope with this using Financial Director. We have some clients wanting to view these searches as having the full amount of VAT applied and show as profit costs on the bill, we also have clients who simply wish to add VAT to certain disbursements at the point of billing.
On our software we are able to give our clients the choice and our dedicated legal cashiering support team have created ‘How Do I’ notes on both processes which are now available to all DPS clients by emailing CashierSupport@Dpssoftware.co.uk