VAT Handling of Disbursements for Search Fees

12 March, 2024

Do you charge VAT on disbursements for search fees, for example when invoicing clients for the cost of Land Registry or local authority searches that you have undertaken in relation to their matters?  

We know that historically, many firms did not charge VAT in respect of payments made for electronic property searches, Land Registry searches or for obtaining copy documents from the Land Registry. It was generally accepted that these fees were a disbursement and therefore not subject to VAT.

However, case law has taken a different view and in light of two cases (see BrabnersLLP v the Commissioners for HM Revenue and Customs and BritishAirwaysPLC  v J Prosser) so we are reviewing existing guidance.  In the interim, we encourage you to read the case law (see also below) and review your current invoicing procedures and if need be, seek tax advice about your VAT treatment of search fees.

Short, anonymous survey

To get a sense of how practices treat search fees for VAT purposes, we would be grateful if you could answer this very short, anonymous survey consisting of eight simple yes or no questions. Please complete the survey by midday on Monday, 8th April.

Complete the short survey

The Case Law

The First Tier Tribunal Tribunal in the case of BrabnersLLP concluded that electronic property searches formed part of the overall legal service that was being provided to the client.  In other words, the search report informed the legal advice and professional services the client was paying for, meaning that it was not a disbursement and was liable to VAT.  The second case is a non-binding decision of the Court of Appeal [see BritishAirwaysPLC  v J Prosser] which followed a similar approach, albeit in relation to fees for obtaining copies of medical reports. 

Our expectation is that with few exceptions, you will be conducting searches to inform the advice and the professional services that your clients are paying for.  Even in those cases where search reports throw up nothing of significance and you can advise your client to proceed as intended, the search will have informed the services you are providing.  As such, fees for those searches form part of the overall professional service to your client and attract VAT. 

What does this mean for you

We will be reviewing our guidance, and any new or revised guidance will be communicated to you in the usual way.  In the interim, we would encourage you to read the case law, review the VAT treatment of disbursements in your practice and if need be, seek advice from a Tax specialist before reaching a decision about any changes to your invoicing procedures.

You may find it helpful to refer to the HMRC Internal Manual covering search fees VAT Taxable Person at 47000.

Should you wish to discuss this, please contact your Regulatory Supervision Manager

If you have not already done so, we would be grateful if you could answer this very short, anonymous survey consisting of eight simple yes or no questions.

Complete the short survey