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VAT on lawyers' fees

VAT will be added to all lawyers' fees.

VAT on expenses

VAT will also be added to some (but not all) expenses, depending on the VAT rules made by the government.

Broadly speaking, if a lawyer makes a payment on your behalf and then gets reimbursement from the client, the lawyer does not have to add VAT (unless VAT was included in the payment in which case it will be passed on to the client). However, if a lawyer makes a payment on the lawyer's own behalf and then recharges it to a client, he must add VAT. This is a very fine distinction indeed, but thankfully it does not make any difference at all in practice in most cases.

VAT invoices

An invoice does not have to be a VAT invoice even if it includes VAT, but any lawyer will render a VAT invoice on request for all fees.

In relation to expenses, the VAT invoice required for reclaim purposes by a VAT-registered client is the supplier's invoice, not the lawyer's. If the supplier's invoice is addressed to the lawyer (as it frequently will be), then the lawyer can write on it “Payable by client Mr. X” and then, by concession under the VAT rules, the client can use it to reclaim the VAT through a VAT return in the normal way.

Reclaiming VAT from someone else

Where a client is eligible for somebody else to refund their legal fees, that will usually only include the VAT if the client is not a VAT registered business.

If the client is VAT registered, the client will reclaim the VAT from the government through their VAT return in the normal way, and receive just the net (ex-VAT) amount back from the payer.

In other words, VAT is claimed back from the government or the payer, not both!

Sometimes a VAT registered person is only entitled to claim a proportion of their VAT back through the VAT return, not all of it. In that event they can claim the rest from the payer.

Reimbursing VAT to someone else

For the payer, reimbursement of the client's VAT to the client does not entitle that payer to reclaim that VAT even if they are VAT registered. This is because VAT is only reclaimable on fees for services rendered to the payer, and in this situation they have not been rendered to the payer, they have been rendered to the client.

For the same reason a lawyer cannot render a VAT invoice to the payer in the payer's name. The VAT invoice will be addressed to the client. There is no objection to adding onto this the information that it is payable by somebody else. But this still does not entitle the payer to reclaim the VAT.