VAT concessionary treatment—counsel's fees

HMRC has confirmed that an existing VAT concession for counsel’s fees remains in place at present but is under review.

The concessionary treatment for counsel's fees paid into and kept in a client account was agreed between the Bar Council and the Law Society at the time VAT was first introduced. The concession allows solicitors to treat counsel’s advice as supplied directly to their clients and the settlement of the fee as a disbursement, meaning that the client may recover the VAT on counsel’s fees, and the solicitor does not need to keep any VAT record of it.

HMRC has recently confirmed that the concession still currently stands, but that HMRC is reviewing the concession to consider whether it should be withdrawn. If it is withdrawn, HMRC has confirmed that it would do so prospectively, with appropriate advance notice given.

The Law Society is inviting solicitors to respond, by 30 September 2021, with information on the extent and ways in which the concession is being used and its benefits or deficiencies, so that the Law Society may provide this evidence to HMRC to inform its review.