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HMRC internal manual

VAT Time of supply

Tax points for specific categories of supplier: solicitors: legal aid work (contracting arrangements)


Under Legal Services Commission ‘contracting’ arrangements, solicitors undertaking criminal and civil legal aid work receive a standard monthly payment (SMP) based on the anticipated level of work over the forthcoming year. As each case is completed it is ‘billed’ and the fee allocated against either payments already received or against future payments depending on whether the level of work already exceeds the value of SMPs received or visa versa. SMPs are routinely adjusted throughout the year to take account of any disparity in the level of work undertaken. They can therefore relate to cases at various stages of progress, for example those that are

  • completed
  • ongoing, or
  • yet to be started.

Interaction of SMPs with time of supply rules

The normal tax point rules apply in these circumstances. Consequently there is a basic tax point for each case on completion. This means that the VAT treatment of the SMP is dictated by the progress of the work to which it relates.

So, to the extent that an SMP relates to a case that has been completed (and for which a basic tax point has therefore already occurred) the payment itself does not create a tax point. On the other hand, if any part of the SMP is to be offset against ongoing cases, or work that has not yet commenced, it represents a pre-payment for those supplies and so creates a tax point in the normal way.


Further information

The Institute of Legal Finance and Management (with input from HMRC) has drawn up VAT accounting guidance for solicitors who receive SMPs for legal aid work. This is available on their website. The guidance will download automatically without completion of the login details at the top of the page.