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HMRC internal manual

VAT Time of supply

Tax points for specific categories of supplier: solicitors: client accounts

In addition to their own business accounts, solicitors are required by law to maintain a separate client’s account. Money held on behalf of clients must be kept in the client’s account and cannot be used for business purposes. Such accounts are subject to statutory scrutiny by a qualified accountant who is required to submit an annual report to the Law Society.

Although solicitors are subject to the normal tax point rules as they apply to advance payments, the receipt of a payment into the client’s account does not represent receipt of payment for VAT purposes. This only occurs when money is transferred from the client’s account to the general office account. Similarly, a tax point is not created by the receipt of payments from clients in respects of expenses such as stamp duty and Land Registry fees that are accepted as disbursements for VAT purposes. For further guidance on disbursements see the manual covering taxable persons.