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This compensation might influence the location of the place lenders appear on this site, for example, the order during which the lenders seem when included in an inventory. The executor must obtain court approval by filing a noticed petition with the court before making a preliminary distribution to a beneficiary. When it comes to B2B payment methods, two widely used options are ACH checks and physical checks. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. The no value-added part is really important because it is this that decides whether VAT is charged or not.

If you use an NLIS channel provider you may also be charged the NLIS Hub fee. Many solicitors obtain searches online through the National Land & Property Information Service (NLIS) or other online search providers. NLIS (via the licensed NLIS channel providers) and other providers facilitate electronic access to the official sources of land and property information in England Difference Between Disbursements & Expenses and Wales. For example, Barratt Goff & Tomlinson v The Commissioners for Her Majesty’s Revenue & Customs [2011] UK FTT 71 (TC) concerned medical records and reports obtained for use in personal injury litigation. The law firm in that case obtained medical records and reports belonging to the client and then used those records and reports to advise the client on their claim.

VAT on disbursements and recharges

This increases the cost to the client where the search fees are not subject to VAT. No VAT is currently charged on LLC1 search fees or Land Registry fees but VAT will be charged on most other search fees. Some channel providers itemise each item separately, while others group them by category. You should therefore account for input tax in the normal way on any VAT you pay (see How to treat qualifying disbursements).

Transparency is crucial to the SRA with no hidden costs so that the client understands exactly what they are being charged for. Luckily, new case management systems can assist with this by including the time recording elements in the bill if required. A payment is a disbursement of money (usually in the form of a check or currency). Some payments are current period expenses (e.g. current month’s rent payment) but many payments are not expenses of the current period.

Is a Disbursement a Refund?

In some cases, a business may not be VAT registered but close to the registration threshold and can be operating in this manner for many years. However, the correct treatment of expenses as part of their Vatable turnover may take their actual turnover over the VAT registration threshold. In such a case, HMRC has the power to backdate their review of whether a business should have been VAT registered to 20 years, and can assess the VAT that should have been collected, applying penalties. The difference between expenses and disbursements for the purpose of VAT accounting can be confusing because they are technically very different from HMRC’s point of view.

These may include court fees, fees for medical or other expert reports or search fees in a property transaction. The tribunal judge in Brabners concluded that the electronic property searches in question were supplied to the law firm which used them as part and parcel of its own overall supply of legal services to the client. That meant that those costs could not be treated as disbursements for VAT purposes. For example, while pursuing a legal case, an attorney must keep a record of disbursements made on behalf of a client. This may include payments to various third parties for costs incurred in the case, including court fees, private investigator services, courier services, and expert reports. These costs are paid by the law firm to third-party service providers and are typically passed on to the client as part of the overall cost of the legal services.

About this guidance

Allocating a figure based on their hourly rate alone may compromise your liquidity later. If you do treat a payment as a disbursement, you must keep evidence, such as an order form or a copy invoice, to enable you to show that you were entitled to exclude the payment from the value of your supply to your client. If VAT had been charged by the third party, you must also be able to show that you did not reclaim input tax in relation to that supply. A payment categorised as a qualifying disbursement can be charged to your client as a VAT-inclusive amount (if taxable) and excluded when calculating any VAT due on your supply of legal services to your client.

As mentioned above, from March 2017 local authorities were required to start charging VAT on CON29 and CON29O searches, so these no longer need to be considered in detail. Prior to 2017, the CON29, CON29O and LLC1 were ordered together from the local authority and known as the ‘local search’. You may need to consider the search result and advise your client of the result in layman’s terms (for example in a report on title), or perhaps certify title to your client’s bank. The search results would show whether there is anything which adversely affects the property and may impact on a client, buyer or bank’s decision about whether to proceed with a transaction. This has cast doubt on some established practices of solicitors around client invoicing. However, the judge found that every customer knew that the company could not supply an MOT test.