Conveyancing Referral Fees: SRA Disclosure, Transparency Rules and VAT

Conveyancing referral fees: allowed, but disclosed

Referral fees are a fact of conveyancing economics. Estate agents, mortgage brokers, new-build developers, comparison sites and panel managers all refer work, and money changes hands for those introductions. The question conveyancing firms most often ask is whether that is even permitted, because so many people half-remember a referral-fee ban. The honest answer is that, unlike in personal-injury work, conveyancing referral fees are not banned. They are lawful provided they are properly disclosed.

This page separates the regulatory question from the tax question, because they are different and both matter. On the regulatory side, the Solicitors Regulation Authority (SRA) controls referral fees in England and Wales through transparency and disclosure, not prohibition: the SRA Code of Conduct paragraph 5.1 sets out what you must tell the client, and the SRA Transparency Rules require you to publish conveyancing prices including the VAT position and likely disbursements. On the tax side, a referral or introduction fee is consideration for a standard-rated supply of introduction services, so VAT at 20% applies to fees paid and received, and a referral fee is never a disbursement to the client.

Three threads run through this guide: the LASPO carve-out (the statutory ban is personal-injury only), the SRA disclosure and transparency duties, and the VAT treatment. Get all three right and a referral arrangement is straightforward to run compliantly.

What counts as a referral fee

A referral fee is a payment (or other benefit) for the introduction of a client. It can flow either way: you might pay an estate agent, mortgage broker, new-build developer, comparison or lead-generation site, or panel manager for sending instructions to you, or you might be paid for introducing a client to a third party such as a broker or surveyor.

The SRA does not leave the characterisation to the firm. Under SRA Code of Conduct paragraph 5.2, where it appears that you have made or received a referral fee, the payment is treated as a referral fee unless you show that it was not made as such. That presumption matters: the burden is on you to demonstrate that a payment to or from an introducer was for something else (genuine advertising, a distinct service, or marketing spend) rather than for the introduction of clients.

It is worth distinguishing three things that look similar. A referral fee is paid for an introduction. A fee-share is an arrangement to share the fee earned on a matter, which engages the same paragraph 5.1 disclosure and the written-agreement requirement. Marketing or advertising spend (paying for a listing or a campaign that is not tied to specific introductions) is a cost of doing business and is not, in itself, a referral fee, though the paragraph 5.2 presumption means you should be able to evidence the distinction.

The benefit does not have to be cash to count. A reciprocal arrangement (you refer work to an introducer who refers work back to you), discounted services, hospitality of real value, or any other quid pro quo for introductions can fall within the same regime. The substance of the arrangement, not how it is labelled or whether money visibly changes hands, determines whether the disclosure and VAT consequences apply. A firm that hears the word "fee" and assumes the rules only bite on an invoiced cash payment is reading the position too narrowly.

The LASPO ban: personal injury only, not conveyancing

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) is the source of the referral-fee ban that causes so much confusion. Section 56(1) provides that a regulated person is in breach if they refer prescribed legal business to another person and are paid for the referral, or if prescribed legal business is referred to them and they pay for the referral. So far that sounds broad.

The scope is in section 56(4). "Prescribed legal business" means business involving legal services where those services relate to a claim or potential claim for damages for personal injury or death, or to any other claim or potential claim for damages arising out of circumstances involving personal injury or death, or to business of a description specified in regulations made by the Lord Chancellor. Conveyancing is not within that definition. It is not a personal-injury or death claim, and it has not been brought in by regulations.

The practical consequence is clear: the LASPO ban does not reach conveyancing referral fees. A firm that declines a perfectly lawful conveyancing referral arrangement because it believes all referral fees are banned has misunderstood the statute. The ban is narrow and specific. Conveyancing referrals remain lawful, subject to the SRA disclosure regime considered next.

The confusion is understandable. The LASPO ban arrived in 2013 alongside a wider package of personal-injury reforms, and the headline "referral fees banned" travelled far further than the detail that the ban was confined to personal-injury and death claims. Many consumer-facing and even some adviser pages still imply the prohibition is general. It is not. For a firm that handles both personal-injury and conveyancing work, the distinction is operational: referral payments are prohibited on the personal-injury side and permitted (with disclosure) on the conveyancing side, so the firm's introducer arrangements and accounting must keep the two streams apart. A single blanket policy in either direction is wrong, either forgoing lawful conveyancing referrals or, worse, making prohibited personal-injury referral payments.

The SRA Code disclosure duty (paragraph 5.1)

The core regulatory control on conveyancing referral fees in England and Wales is disclosure under SRA Code of Conduct paragraph 5.1. It requires you to ensure that:

• 5.1(a): clients are informed of any financial or other interest which you, your business or your employer has in referring the client to another person, or which an introducer has in referring the client to you.
• 5.1(b): clients are informed of any fee-sharing arrangement that is relevant to their matter.
• 5.1(c): the fee-sharing agreement is in writing.
• 5.1(d): you do not receive payments relating to a referral, or make payments to an introducer, in respect of clients who are the subject of criminal proceedings.

Disclosure to the client is mandatory, not optional. The client must be told, before or at the point of instruction, about the introducer's interest and any relevant fee-share, and the fee-sharing agreement itself must exist in writing. Behind these specific duties sits the overarching obligation to act in the client's best interests and to maintain your independence: a referral arrangement must not skew the advice you give or compromise the service the client receives. The paragraph 5.1(d) criminal-proceedings carve-out is absolute and is not cured by disclosure.

The SRA Transparency Rules: published prices, VAT and disbursements

The SRA Transparency Rules require firms to publish cost information for specified services, and residential conveyancing is squarely within them (freehold and leasehold sales and purchases, and mortgages or re-mortgages), as is probate (uncontested, UK assets). The published information must cover the total cost, or an average or range; the basis of charging; the likely disbursements and their cost; and the VAT treatment, meaning whether VAT is included.

Referral arrangements interact with these duties. Where a referral relationship affects what the client ultimately pays (for example, where an introducer's involvement is reflected in your pricing), the published-price and disclosure obligations bite, and your published figures must remain accurate and consistent with the live arrangement. The transparency duty and the paragraph 5.1 disclosure duty reinforce each other: one publishes the price picture to the world, the other tells the individual client about the specific introducer interest on their matter. For the wider context of how conveyancing pricing is built and disclosed, see our guide on fee structure for UK residential conveyancing firms.

VAT on referral fees paid to introducers

An introduction is a supply of services for VAT, and a referral fee is the consideration for that supply. Where the introducer is VAT-registered, the referral fee is standard-rated at 20%, and the introducer should issue a VAT invoice for the fee plus VAT.

If your firm is VAT-registered and the introductions support your taxable conveyancing supplies, you can recover that VAT as input tax in the normal way. Because conveyancing is standard-rated rather than exempt, the input VAT on referral fees is not caught by partial-exemption restrictions. What you must not do is treat the referral fee as a disbursement and recharge it to the client without VAT. A referral fee is your own cost: it does not meet the eight disbursement conditions in VAT Notice 700 section 25.1.1, because you do not pay it as the client's agent and the client is not the party responsible for it. It belongs in office account as a marketing or cost line, with the recoverable VAT separately identified. The VAT mechanics for legal services generally are set out in our overview of conveyancing VAT rules for 2025/26.

VAT on referral fees the firm receives

The same logic runs the other way. Where your firm introduces a client to a third party, such as a mortgage broker, surveyor or financial adviser, and is paid for that introduction, the fee you receive is your standard-rated income at 20%. It is a supply of introduction services made by your firm, not an exempt supply and not a disbursement.

That income counts towards your taxable turnover for the VAT registration threshold of £90,000. A firm that is not yet registered must include introduction fees it receives in its rolling 12-month turnover test, and register on time if the total crosses the threshold. A registered firm accounts for output VAT on the fee. Because the introduction supply is taxable rather than exempt, no partial-exemption question arises on the income side. For the registration mechanics and when you must register, see our guide on VAT registration for solicitors, and for the general position that legal services are standard-rated, our overview of VAT on legal services.

Accounting and bookkeeping for referral arrangements

The bookkeeping follows the analysis above. Referral fees paid go through office account as a cost line, with recoverable input VAT (if you are registered) identified separately. Referral fees received go through office account as standard-rated taxable income. Neither sits in client account, because neither is client money: they relate to introductions, not to funds you hold for a matter. Keeping referral payments out of client account also avoids any suggestion of using the client account to provide banking facilities, which the SRA Accounts Rules prohibit. For the boundary between client and office money, see our guide on client money accounting for solicitors.

On the compliance file, keep the written fee-sharing agreement required by paragraph 5.1(c), and maintain a register of introducer arrangements recording who the introducer is, the terms, the VAT treatment, and the disclosure given to clients. This register supports both SRA scrutiny and any audit, and it makes it straightforward to discharge the paragraph 5.2 burden if a payment is ever questioned.

Coding discipline pays off at the year end and on the VAT return. Referral fees paid should sit in a clearly identified expense account (for example, a referral or introducer-fees nominal code) rather than being buried in general marketing, so the recoverable input VAT is visible and the total introducer spend can be reported. Referral fees received should be coded to a taxable income account with output VAT applied, kept distinct from professional fee income so the introduction turnover can be identified for the registration-threshold test. Where an introducer is not VAT-registered, there is no input VAT to recover on a fee you pay (the introducer cannot charge VAT), but the fee is still your cost and still requires disclosure, so the regulatory analysis is unchanged.

Verifying the introducer and the arrangement

Disclosure and VAT are necessary but not sufficient. Because the firm remains responsible for acting in the client's best interests, a degree of due diligence on the introducer and the arrangement is sensible. That means understanding who the introducer is and how they generate the introductions, checking that the introduction process does not mislead clients into thinking they have no choice of conveyancer, and satisfying yourself that the commercial terms do not create pressure to cut corners on the matter. Where the introducer operates a panel, review the panel terms for anything that would compromise your independence, such as service-level requirements that conflict with your professional obligations.

The written agreement required by paragraph 5.1(c) is the natural place to capture these points: the parties, the nature and amount of the fee, the VAT treatment, the disclosure each side will make to clients, the exclusion of criminal-proceedings clients, and the position on the firm's independence. A well-drafted introducer agreement protects the firm in an SRA review and gives the bookkeeper the basis for coding the payments correctly. Review it whenever terms change, and make sure the client-facing disclosure wording you actually use matches the live agreement, so that what the client is told and what the file records are consistent.

Worked example: a panel-manager arrangement

The following is illustrative, not advice. A conveyancing firm joins a panel run by a panel manager who routes purchase and sale instructions to member firms. The panel manager charges a fee for each instruction it sends. Applying the substance test and the paragraph 5.2 presumption, the firm treats the panel fee as a referral fee. The panel manager is VAT-registered, so it invoices the fee plus 20% VAT, which the firm recovers as input tax (it supports the firm's standard-rated conveyancing). On each matter the firm discloses the panel arrangement and the introducer's interest to the client (paragraph 5.1(a)), and the panel agreement, which is in writing (paragraph 5.1(c)), is on the compliance file and in the introducer register.

Part of the panel manager's charge is described as a fee for use of its case-management software rather than for introductions. The firm documents that split, because the introduction element is a referral fee but a genuine, separately identifiable charge for software is a different supply. Both elements are standard-rated and recoverable as input tax here, so the VAT outcome is the same, but the characterisation matters for the paragraph 5.2 analysis and for the firm's published-price transparency. None of the panel payments touch client account: they are office-account business, recorded against the firm's own cost codes.

Risks and red lines

A short list of the things that turn a lawful arrangement into a problem. First, independence: the referral must not skew your advice or compromise the client's best interests. Second, the criminal-proceedings carve-out in paragraph 5.1(d), which disclosure does not cure. Third, the Transparency Rules publication obligation, where inaccurate or absent published pricing is itself a breach. Fourth, and most relevant to the accounts, mislabelling a referral fee as a disbursement to the client. That is both a VAT error (output VAT not accounted for, or input VAT wrongly passed on) and a transparency breach, because it misstates the true cost to the client. Keep the regulatory disclosures and the VAT treatment aligned and these risks fall away.

A further point worth flagging is timing. Disclosure under paragraph 5.1 is most effective when the client is told about the introducer's interest at or before the point of instruction, not buried in a closing statement after the work is done. The client should understand the referral relationship while they still have a free choice of adviser. On the VAT side, account for output VAT on fees you receive in the period in which the supply is made (the introduction), and recover input VAT on fees you pay in the normal way once you hold a valid VAT invoice. Treating referral income as if it were outside the scope of VAT, or deferring it indefinitely, creates an under-declaration that surfaces on a VAT inspection.

Worked example: an estate-agent referral

The following is illustrative, not advice. A conveyancing firm in England agrees to pay a local estate agent a referral fee for each purchase instruction the agent sends its way. The agent is VAT-registered, so the agent invoices the agreed referral fee plus 20% VAT. The firm is VAT-registered and the introductions support its standard-rated conveyancing work, so it recovers the VAT as input tax. On each matter, the firm tells the client about the agent's interest in the referral (paragraph 5.1(a)), and the written fee-sharing agreement is on file (paragraph 5.1(c)). Because this is conveyancing rather than a personal-injury or death claim, LASPO does not apply.

Now reverse the flow. The same firm refers a buyer to a mortgage broker and is paid for the introduction. That fee is the firm's standard-rated income at 20%, declared as taxable turnover, and the client is told of the firm's interest in making the referral (paragraph 5.1(a)). In neither direction is the referral fee a disbursement: the outbound fee paid to the agent is the firm's own cost, and the inbound fee received from the broker is the firm's own income. Both run through office account, never client account.

Practical checklist

1. Confirm the work is conveyancing, not a personal-injury or death claim, so the LASPO section 56 ban does not bite.
2. Disclose any introducer's interest and any relevant fee-share to the client under SRA Code paragraph 5.1(a) and (b).
3. Put the fee-sharing agreement in writing (paragraph 5.1(c)) and keep it on the compliance file.
4. Exclude criminal-proceedings clients from any referral payments (paragraph 5.1(d)).
5. Treat referral fees paid as standard-rated input tax, recoverable if you are VAT-registered, never as a client disbursement.
6. Treat referral fees received as standard-rated income at 20%, counting towards the £90,000 registration threshold.
7. Publish conveyancing prices, the VAT position and likely disbursements per the SRA Transparency Rules.
8. Keep all referral money in office account and maintain a register of introducer arrangements.

Where specialist input helps

The mechanics here are settled, but two areas reward a careful eye: confirming the VAT treatment of each introducer arrangement (paid and received), so that nothing is mislabelled as a disbursement, and reconciling your SRA Transparency Rules pricing with the live referral terms. An accountant who works with conveyancing firms can review your introducer register, the VAT coding of referral fees in your nominal ledger, and the consistency of your published prices, so that the regulatory disclosures and the tax treatment line up. The sibling guides on abortive conveyancing transactions, VAT and WIP, SDLT refund and overpayment claims for conveyancers and non-resident and corporate buyer SDLT for conveyancers cover the related accounting edge cases a conveyancing practice meets.