I have made a payment of £x including VAT to our solicitors which is an undertaking to pay a third party at sometime in the future. How do I account for that in my VAT return or should I wait until the third party issues a VAT receipt? Advice appreciated. Stephen
Check with your accountant - if it’s an undertaking to pay for a service that will be rendered to someone else (like a landlord’s legal fees) then you may not be eligible to reclaim the vat at all.
Thanks Ian. Not what I wanted to hear but what you say could well be correct. I am waiting to hear from my accountant as well. It’s confusing as the request for the undertaking came from the landlord’s solicitors that would be paid by the money held by my solicitor in my client account and I would not be paying the landlords for them to pay their solicitor.
Yeah, I had the same thing a while back, I lodged money with my solicitor so they could give an undertaking to the landlord’s solicitor that their fees would be paid. After completion the money was passed over from one solicitor to the other but the landlord’s solicitor wouldn’t give me a VAT invoice as they said only the beneficiary of their services (the landlord) is eligible to reclaim VAT on their fees.
Thanks for your concise reply. I think you are spot on and I will not be able to claim the VAT back. Stephen
Ian. Researching this a little more, I came across the following: VATSC11533 - VAT Supply and Consideration - HMRC internal manual - GOV.UK It supports exactly what you say but adds that undertakings should be paid net of VAT as the recipient of the advice, i.e. the landlord, will be able to claim the VAT element as well. Maybe you can recover the VAT element of the undertaking that you paid?
If the landlord were themselves VAT registered, yes, but in my case they were not.
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