VAT on Solicitor costs as a non-resident in the UK

[topazz]

Hi Sean and Dally,

The solicitors incurred only their own costs, no third parties involved, no Court appearances even... mostly in relation to reading and dealing with my application, or so they say.
They wrote to the Court only, refusing to disclose the information requested, on the grounds of client confidentiality.
Without going into the case in depth which may only confuse the matter further, I was only requesting disclosure of how the solicitors former client funded the case in view of their and their client's declarations that he had been funded by third parties. Their former client, now a Judgment Debtor in my favour, refused to disclose this information, leaving me with the only other alternative of asking his former solicitors and which I did with my application.
It was only when they declared they would attend a hearing to claim their costs if I did not agree to pay their costs of my application that I agreed to cover their costs incurred in my application up to that point.
I fail to see how they supplied me with anything... certainly not any service or goods.
I would agree with you both in that they are costs of "compensation" for being disturbed!

As far as I know, there are no other parties involved in this issue where costs may have been incurred, and I am being asked to pay these solicitors VAT on their costs.

I hope that clarifies better the situation and hank you for your interest in this matter.

[SeanJames]

Right,

I can't see where the supply is to you from the solicitors firm then. I've read and re-read it over and over again and looked through HMRC's guidance in V1-3 Supply and Consideration and there is nothing there that would make me see that this is a taxable supply from them to you.

Have you asked them why they believe that VAT is applicable on this?

Cheers
Sean

[topazz]

Hi Sean,

I have asked them to agree to me sending them their costs excluding VAT or if they disagree to send me a VAT invoice stating on what basis they are doing so (as Dally had suggested). I have not yet had a reply but will let you know the outcome.

[SeanJames]

Topazz,

I believe I've found you the answer.

http://www.justice.gov.uk/civil/procrules_fin/pdf/practice_directions/pd_part43.pdf

Section 5.3 deals with VAT on costs. As you do not have the right to recover UK VAT, then it is applicable on the costs that you've incurred.

Its also in Tolley's Tax Guide section 35.13

Let me know...

Sean

[topazz]

Hi Sean,

I have looked again at the section 5 but feel that my case falls into the following category which is coverd by 5.18 and 5.19 as follows:

Litigants acting in person
5.18 Where a litigant acts in litigation on his own behalf he is not treated for the purposes of VAT
as having supplied services and therefore no VAT is chargeable in respect of work done by that
litigant (even where, for example, that litigant is a solicitor or other legal representative).
5.19 Consequently in the circumstances described in the preceding paragraph, a bill of costs
presented for agreement or assessment should not claim any VAT which will not be allowed on
assessment.

I believe the solicitors are "acting in person" in this case, as they were not supplying me with a service, nor to a client to whom I would be paying costs and subsequently therefore his VAT also.

I have written to the solicitors to ask for a VAT invoice if they feel this is due... but they have failed to respond to date, but when they do, I will update you.

I have been unable to consult Tolley's Tax Guide on the internet, I think I would have to order the book !

Thanks for your help on this.

[topazz]

I have written twice to ask for a VAT invoice from the solicitors quoting the various texts on the matter and to which I have had no reply. I really do not know what to make of it.

[SeanJames]

I'm not one to advocate not paying the VAT as it can cause all manner of problems with the people that are invoicing you.

If you've made them aware of what you believe is correct (and from my reading, this appears to be the correct treatment) then all that you can do is re-inforce this. Its not going to be joyful on your behalf, and you must remember that VAT is wholly self-assessing, as in, the VAT treatment is decided upon by the people that are invoicing you, and it is up to you the customer to convince them otherwise.

HMRC will not intervene in the matter because at the end of the day this is extra revenue for themselves, so the only course of action for you, should you want to resolve it, would be to look through civil proceedings... Not exactly the cheapest course though I'm afraid.

Sorry
Sean