Guidance

Barristers and advocates (VAT Notice 700/44)

Find out about the VAT rules that apply to VAT-registered barristers or advocates.

Detail

This notice cancels and replaces Notice 700/44 (June 2007).

Any reference in this notice to a ‘fee’ means a fee, or any part of a fee, received by a barrister or advocate acting in their professional capacity.

1. Overview

1.1 Information in this notice

This notice explains the rules which apply to VAT-registered barristers or advocates. It provides information about:

  • when you should normally account for VAT on your professional fees
  • how to account for VAT on outstanding fees if you cease to practise
  • how to cancel your registration
  • what to do if you cease to practise but continue to make other taxable supplies and
  • what to do if you are partly exempt for VAT purposes

You need to have a working knowledge of basic VAT principles, as outlined in Notice 700: the VAT guide.

1.2 Changes to this notice

This notice has been updated to reflect the introduction of the new online deregistration system and changes to postal addresses.

2. Tax point rules for practising barristers and advocates

2.1 Special tax point rules

There are special tax point rules for supplies made by barristers and advocates. These are provided for in regulation 92 of the Value Added Tax Regulations 1995 (SI 1995/2518). The rules were established as the result of discussions with the Bar Council and the Faculty of Advocates.

2.2 Definition of the ‘tax point’

A tax point is the time at which the law treats a supply of goods or services as having taken place. VAT-registered businesses must normally account for VAT in the tax period in which the tax point occurs and at the rate of VAT that’s in force during that period.

2.3 Tax point rules for barristers and advocates

If you’re a barrister or an advocate, the tax point for the supply of your professional services is the earliest of the date you:

  • receive the fee for those services
  • issue a VAT invoice for them
  • cease to practise as a barrister or advocate

This means that VAT becomes due on all your outstanding fees on the day you cease to practise. Section 5) of this notice explains what to do if you would like HMRC’s permission to defer payment of the VAT due on those outstanding fees.

3. Ceasing to practise and deregistering for VAT

3.1 What to do if you cease to practise

If you cease to practise and stop making taxable supplies of any kind, you must deregister for VAT.

You must let us know about your intention to deregister within 30 days of ceasing to practise. You can do this online or you can fill in a form VAT7 and send it to the National Registration Service through the post. The address to send it to is on page 4 of the form.

If you carry on making taxable supplies, but can satisfy HMRC that your taxable turnover in the next 12 months will remain below the deregistration limit, you can ask for voluntary deregistration.

If you have any outstanding professional fees, you should enclose a letter with the Form VAT 7 stating whether:

  • you intend to pay the VAT due on the fees straight away or
  • you wish to defer payment

The online deregistration system does not have the capacity for documents to be attached to applications. If you’ve applied to deregister online, you’ll need to send the letter through the post to the address for the VAT Registration Service in paragraph 5.1 of this notice.

You can find more information about cancelling your registration in VAT Notice 700/11: cancelling your registration.

3.2 When to account for VAT on your outstanding fees

You must normally account for VAT on all your outstanding fees at the time you cease to practise. However, with HMRC’s permission, you may defer paying the VAT on any outstanding fees until the earlier of the date you:

  • actually receive the fees
  • issue a VAT invoice

If we allow you to defer payment, you must follow the procedure explained in section 5.

When you do pay HMRC the VAT, you must calculate it at the rate which was in force when you ceased to practise rather than at the rate which is in force when you send the payment.

3.3 Final VAT Return

When you’ve applied to cancel your registration, you’ll receive a final VAT return. You must declare on it both of the following:

  • all the professional fees you received between the end of your last full tax period and the date your registration was cancelled
  • any other supplies you’ve made during that time

Even if HMRC has approved your request to defer paying VAT on your outstanding fees (see section 5), you must account for the VAT on any fees which you have:

  • already received
  • shown on a VAT invoice
  • shown on your final return

3.4 Issuing VAT invoices after you deregister

You can continue to issue VAT invoices after you deregister under the following conditions:

  • you must have supplied the services to which the fees relate before the date on which your registration was cancelled
  • you must show the date you ceased to practise as the tax point
  • you must charge the VAT rate which was in force when you ceased to practise even if the rate has changed in the interim

4. Remaining registered after you cease to practise

4.1 Reasons you many need to remain registered

You will have to remain registered for VAT if you’ve ceased to practise as a barrister or advocate but:

  • you’re still making taxable supplies of a different nature
  • the turnover from those supplies is above the deregistration limit

You must carry on accounting for VAT on these supplies in the normal way. They’re not eligible for the special tax point rules which apply to professional fees. You can find more information about standard tax points in Notice 700: the VAT guide.

4.2 VAT return for the period in which you cease to practise

The VAT return for the period during which you ceased to practise must include:

  • the fees you received
  • the fees you invoiced
  • any other supplies you made
  • that period

If HMRC has approved your request to defer payment of VAT on your outstanding professional fees, you can omit them from the return.

Paragraph 5.2 tells you how to account for the VAT on the outstanding fees.

5. Deferring payment of VAT on outstanding fees

5.1 Defer payment of VAT

You must have HMRC agreement to defer payment. When you cease practising as a barrister or advocate, you can write to the VAT Registration Service requesting permission to defer payment on outstanding fees.

When we receive your request, we’ll send you a Form VAT 811. You must list on it:

  • every standard-rated fee which is outstanding
  • the name of the relevant case
  • the professional client
  • the date of the first fee note

Continue on a separate sheet of paper if there isn’t enough space on the form for all your cases.

If you don’t know exactly how much a particular fee is going to be when you are filling the form in, estimate the amount due.

Provide an address for correspondence.

Send the completed Form VAT 811 in the envelope supplied to:

HM Revenue and Customs
GABS Team
DMB 612
West Yorkshire
BX5 5AB

HMRC will return a certified copy to you when we approve your request for deferment.

5.2 Pay the VAT on outstanding fees

HMRC will send you a Form VAT 812 every quarter. Use the form to declare and pay the VAT due on any fees:

  • you have received
  • in respect of which you have issued a VAT invoice
  • for the period specified on the form

Use the form to let us know the name of the relevant case. Provide enough detail for us to be able to identify each fee from the information on the Form VAT 811.

If you’ve received any fees for services which you expected to be zero-rated when you completed Form VAT 811, but which turn out to have been standard-rated, you must declare these on the Form VAT 812 as well.

You must complete and return the VAT 812 even if you’ve nothing to declare for that period. Failure to do so may result in your deferment being cancelled and any outstanding tax becoming due.

After the first year, HMRC will give you the option of completing a Form VAT 812 every 6 months rather than quarterly.

5.3 What happens after you’ve paid all your outstanding VAT

When you’ve received all your outstanding fees, and paid HMRC all the VAT due, complete the ‘declaration of final payment’ on the Form VAT 812. If there were any items you listed on Form VAT 811 that you haven’t paid VAT for (for example, because you couldn’t collect the fee), tell us why you haven’t accounted for VAT on them when you declare your final payment.

5.4 Records you must keep

You must keep the records of your outstanding fees for 1 year after you’ve made the declaration of final payment so that we can inspect them if we need to.

6. Special circumstances

6.1 If you’re partly exempt for VAT purposes

If you incur input tax which relates to exempt supplies, you’re regarded as being partly exempt and you will probably not be able to claim all your input tax. You can find out more about this in VAT Notice 706: partial exemption.

You may need, in due course, to make an adjustment to the input tax you’ve reclaimed if you have:

  • made exempt supplies since the beginning of the 12 month period in which you ceased to practise as a barrister or advocate
  • asked to defer the VAT on your outstanding fees

Contact VAT: general enquiries if you need any advice about how to make this adjustment.

6.2 If a practising barrister or advocate dies

If you’re the clerk of a practising barrister or advocate who dies, please inform our National Advice Service as soon as possible.

If you’re the personal representative (or the agent of the personal representative) of a practising barrister or advocate who dies, tell HMRC, within 10 days of the grant of Probate or Order for Administration, whether you wish either:

  • to pay VAT on the barrister’s or advocate’s outstanding professional fees straight away
  • to defer payment

If you choose to defer payment, you must follow the procedure explained at section 5.

Send all correspondence to the address in paragraph 5.1.

HMRC will need a contact address for you and will ask you to sign:

  • an application form for deferment of VAT, adapted for use by someone representing a barrister or advocate
  • accounts, at regular intervals, of professional fees received

6.3 How to manage VAT on common expenses in shared chambers

In shared chambers, the costs of common expenses (for example, premises, office equipment, office services) are often apportioned on an agreed basis. Each invoice for the supply of common goods or services is made out to the head of chambers, or to a nominated member. It is also acceptable for the invoice to be made out to the barristers’ or advocates’ clerk as long as the clerk is not registered for VAT.

Each member of the chambers then makes the appropriate payment for their share of the expenses.

Three special methods of accounting for VAT have been agreed for use in these circumstances. The choice is up to the barristers or advocates, but each method has certain conditions.

Method 1

The nominated member, to whom the invoice has been addressed, treats the full amount of VAT as input tax. They account for output tax for on the shares charged to all the other members of chambers.

Members of the chambers who are VAT-registered are entitled to claim back the VAT charged to them as their input tax.

As a concession, the nominated member need not issue tax invoices for these supplies. However, there must be a system which allows for each member’s record to be cross-referenced to:

  • output tax charged by the nominated member
  • the input tax deducted by other members
  • the original tax invoice

This will help to ensure that no more than the total VAT stated on the original invoice is claimed back.

The records of all members of chambers must be available during a visit to any one of them.

Method 2

The nominated member, to whom the invoice has been addressed, does not charge output tax to the other members of chambers. Instead, the input tax is apportioned so that VAT-registered members can claim it back on the basis of their own contributions.

Records must be kept of the apportionment of input tax between the members. Each member’s records should cross-reference the input tax claimed back to the tax invoice.

The records of all members of chambers must be available during a visit to any one of them.

Method 3

The nominated member, to whom the invoice has been addressed, deducts the whole amount of input tax and pays an equal amount of money into the common fund. This method may only be used when all members of chambers are registered for VAT.

6.4 Shared expenses and the flat rate scheme

Barristers or advocates who use the flat rate scheme are not normally entitled to claim input tax. Instead, they calculate and pay a flat rate percentage of their total taxable turnover.

Special accounting rules apply to barristers or advocates:

  • who are on the flat rate scheme
  • whose chambers use Method 3 (see paragraph 6.3)

These are explained in VAT Notice 733: Flat Rate Scheme for small businesses.

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Published 19 June 2007