GIBBINS

Please note that following the change in the VAT rate to 15%, we would draw the following provisions to your attention: -

1. Paragraph 3.3.2 Single supplies carried over a period of time (from HMRC VAT change in standard rate for VAT registered businesses), provides “if you are making a single supply of a service which is nevertheless carried out over a period of time which spans the change in rate (e.g. the service provided by a Solicitor) the whole supply can be charged at the new 15%. Any VAT already accounted for at 17.5% (e.g. on payments on account made before 1 December 2008) may be adjusted using the special change of rate rules described in Paragraph 3.1” of the HMRC Detailed Guide.

2. With regard to Counsel’s fees:-

Paragraph 9.1 of the HMRC Detailed Guide provides “If you are a Barrister or Advocate and you followed the arrangements under which fee notes do not become VAT invoices, then the tax point for your fees is normally the date you receive payment. Fees received on or after 1 December will be liable to VAT at 15%. If you have received fees before 1 December for case that will be not be completed until after that date, you can recalculate VAT at 15%, but you may need to issue a credit note to your instructing Solicitors”.

3. With regard to disbursements other than Counsel’s fees:-

A provider, i.e. Solicitor, may pay a disbursement incurred by them during the course of a case, by way of example at £117.50 and account for VAT at 17.5% in the VAT return, then when they claim, e.g. from the LSC, the rate may be 15% for VAT based upon the completion date of a case after 1 December. The Solicitor is now being paid £115.00 by the LSC and the difference is accounted for in their VAT returns. The cost to their business is £100.00 and the income that they receive is £100.00.

This is mentioned by way of illustration.

4. Having regard to the foregoing, in respect of all work concluded or completed on or after 1 December 2008, the appropriate VAT rate is 15%. The definition of conclude in this context is to settle finally, i.e. when the costs have either been assessed or agreed.

5. All bills of costs/claims for costs which have been drawn on or after 1 December 2008 are calculated at the new rate of VAT of 15%.

6. In the event that you encounter any difficulties with either the LSC or the Courts, then their attention should be drawn to the above.

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