This guidance deals with general issues of Value Added Tax (VAT) as it affects the Scottish Legal Aid Board and claims made by you for work done.
VAT is a complex tax governed by the Value Added Tax Act 1994 (VATA) so this overview is very limited in scope.
VAT is a tax on consumer expenditure collected in the United Kingdom on all business transactions. It is collected whenever there is a taxable supply of goods or services by a taxable person as part of their business. The provision of legal advice, assistance and representation is a supply of services. Solicitors’ firms are usually registered for VAT and provide a service in respect of their business. The position of Not for Profit Agencies may be more complicated.
If you are a solicitor who is VAT registered when you are preparing your account, you should submit the bill net of VAT and VAT will be added at source according to the information you have provided in your payment mandate.
We will not add VAT unless you provide evidence to demonstrate you are VAT registered.
VAT will usually be added to the value of the supply when your bill is calculated.
Legal services provided by counsel are different and invoices in such cases will be submitted with the appropriate VAT element added to and included in the claim invoice total, where appropriate.
All services provided by you in a legally aided case are services supplied to the client, not us.
As they are supplied to the client, the client is the recipient of the service so it is the client’s status that is relevant to the VAT position.
This is particularly important if the client is considered to reside overseas. It will also be important where the proceedings have arisen during the course of the client’s business although this is far less likely under legal aid.
For the purposes of VAT law, anything which is not a supply of goods but is done for a consideration is a supply of services (VATA, Section 5(2)).
While there must be a link between the service and the payment for those services, the payment itself does not have to come from the recipient.
In legally aided cases, the fact that we as a third party pays you does not alter the relationship between the client and the provider for VAT purposes.
VAT is generally added to the fee total for work done by you, and this is generally straightforward. There are, however, a number of more complex issues which need to be borne in mind when you are calculating the exact value of the supply.
Please refer to the guidance available on the changes we have made to our online system to help us identify whether your fees and outlays should be chargeable with, or without, VAT.