Success in defending Law Firm under HMRC Investigation following the Brabners VAT on disbursements case

On 31 May 2018 the Law Society published interim guidance on the treatment of the Brabners First Tier Tribunal case on the VAT treatment of electronic property searches.

The interim Law Society guidance is in line with that already produced in our guidance notes and blogs last updated in our Q and A blog of 11 October 2017. We advise that all the guidance in our blogs still applies:

Disbursements VAT case for law firms – Frequently Asked Questions

Disbursements VAT case ruling goes against Law Firm

As a reminder:

  • The safest way to deal with this issue is to apply the HMRC conditions to any item that you are considering treating as a disbursement.  These conditions are detailed in our blogs along with specific examples
  • HMRC have accepted that postal searches may continue to be treated as disbursements by concession but have indicated that they will be reviewing this concession
  • The Law Society requests that you contact them if you receive an approach from HMRC on this subject Disbursements@lawsociety.org.uk.  As noted below it would also serve you well to contact us for assistance  
  • HMRC have started to challenge law firms on this issue and are now raising assessments
  • Armstrong Watson is well placed to assist law firms in this confusing area, and especially in the event of an HMRC inspection.

Our success in defending a Law Firm as a result of the Brabner’s case

We are now starting to see HMRC actively targeting this area on inspections.  Only last week we were able to intervene at an early stage in a particular case by providing sound advice to a law firm  that has resulted in a positive outcome.

HMRC raised an assessment to the law firm for over £30,000 in respect of their view of the impact of the Brabner’s case on the particular firm.  Our check of the basis of the assessment revealed that there was a major flaw in HMRC’s calculation of the assessment.

The letter from HMRC confirming the assessment had sought agreement to their figures but before agreeing to anything the firm correctly sought our advice.  Although not finalised yet we expect to have the assessment reduced by about half.

A great outcome for the firm, but an indication of risk to others.

If you feel you need some assistance in this area and especially in the event of a VAT inspection, please get in touch at an early stage

Email Stephen

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