HMRC have announced in Revenue and Customs Brief 6 (2020) that they are withdrawing the postal concession for property searches with effect from 1 December 2020. From this date, solicitors and conveyancers will no longer be able to treat postal property searches as a disbursement, and VAT must therefore be charged.
The change comes as a result of the Brabners decision ([2017] TC 06093) where it was held that searches provided with additional analysis did not qualify as disbursements and instead should form part of the service provided by the solicitors and conveyancers. As a result, the recharge of search fees (subject to certain exceptions) were subject to VAT. One of the exceptions to this ruling was the ‘postal concession’; an informal agreement made in 1991 between the Law Society and HMRC which allowed for fees in relation to property searches conducted by post to be treated as disbursements.
HMRC now believes that the existence of the ‘postal concession’ causes confusion about the correct treatment of other searches. HMRC is also of the view that postal searches are largely obsolete with in the digital era, and for these reasons they have decided to withdraw the concession.
HMRC have made it clear that the Brabners decision reinforced their policy on the recharge of search fees and solicitors and conveyancers should ensure that they are treating their charges correctly. We have produced a VAT ready reckoner to download for reference.
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