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Tax – VAT

LeO – VAT and costs information

We have reported above that LeO has issued updated costs guidance. Costs complaints often involve disputes above whether VAT was included in the price. The updated guidance states that VAT is often shown separately to the legal fees. It will help clients if the total figure is confirmed at the outset in the client care letter. If this figure is not clear to the client and a complaint is made, LeO is likely to find fault and would possibly hold the firm to the lower figure as this is the sum the client reasonably expected to pay for the service.

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VAT Order – construction services

The VAT (s55A) (Specified Services and Excepted Supplies) Order 2019 comes into effect in relation to supplies made on or after 1 October 2019.

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Making tax digital – VAT

Making tax digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold (currently £85,000) to keep records in digital form and file their VAT returns using software which can keep and maintain the records specified in the regulations. 
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L&T – the basics

A summary of the basic rules on VAT and commercial property:

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Conveyancing searches – disbursements?

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?

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Compensation – or supplying a service?

There is no VAT due on compensation payments (eg an agreed dilapidations liability). But, in every situation you have to look at the nature of the payment – if it is genuinely compensatory then there will be no VAT, whereas if the recipient does something in return, then there is likely to be a VAT ‘supply’.  

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Development – zero-rating

A developer who acquires a bare or existing commercial site for redevelopment will have to pay VAT up-front. Often, the seller will have exercised an option to tax so VAT of 20% will be payable. While this will usually be recoverable, SDLT is charged on the VAT-inclusive price, and so paying VAT can lead to a higher SDLT charge.

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Residential – zero-rating

A property conversion can be zero-rated if it involves the conversion of a building from non-residential to residential. But, there has been much litigation on exactly how this provision works, and we now have important guidance from the UT.

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DIY builder – ‘dwelling’

The DIY builder scheme allows the refunding of VAT if the building is ‘designed as a dwelling’.

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