The government’s temporary reduction in the rate of vat is about to expire. With effect from the 1st January 2010 all new work undertaken will attract vat at 17.5%. However, because of the Bar’s special arrangements with regard to accounting for vat there are certain anomalies which need to be brought to your attention.
The Bar have a concessionary arrangement whereby the Tax Point for vat purposes is the date upon which payment is made rather than when the fee note (‘invoice’) is sent out
It is possible for fees relating to work undertaken between the 1st December 2008 and 31st December 2009 to be paid with a vat rate of 15% regardless of when the fees are actually paid, i.e. even if paid after 1st January 2010
Work undertaken prior to 1st December 2008 will, if paid before the 31st December 2009, only incur vat at the current rate of 15%. However, once that deadline has been passed that older work will revert to the previously applying rate of 17.5%
This means that from the 1st January 2010 it is possible that a fee note could encompass vat at 17.5% on fees relating to work undertaken after 1st January 2010; vat at 17.5% on work undertaken prior to the 1st December 2008 and vat at 15% on work undertaken during the government’s ‘discount window’ of 1st December 2008 – 31st December 2009
Because we are unable to say which cases might be paid between now and the end of the year it is impossible for us to issue amended fee notes reflecting these changes. However, once we pass the deadline of 31st December it will be important for those instructing to ensure that they have secured adequate funds to properly reflect the rate of vat to be applied utilising the guidelines above (alternatively please refer to The Bar Council website information page at: www.barcouncil.org.uk/news/latest/271.html or, alternatively, the Revenue & Customs guidance at:
www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf (9.2 at page 28 refers).
