If you are a UK solicitor handling residential or commercial conveyancing, VAT on your fees is a routine part of the transaction. But the rules around what is standard-rated, what is exempt, and how disbursements are treated can create confusion. Getting it wrong means either underpaying HMRC or overcharging your client and having to correct it later.

This article explains how VAT applies to conveyancing fees for UK solicitors in the 2025/26 tax year, with practical examples and guidance on disbursements, Land Registry fees, and common compliance issues.

Are Conveyancing Fees Subject to VAT?

Yes. Legal services provided by a solicitor, including conveyancing, are standard-rated for VAT at 20%. This applies whether you are acting for a buyer, seller, landlord, or tenant in a property transaction. There is no exemption for residential conveyancing, despite some clients assuming otherwise.

If your firm is VAT-registered (which it will be if your taxable turnover exceeds the VAT threshold of £90,000, or if you have voluntarily registered), you must charge 20% VAT on your conveyancing fees. This includes:

  • Your professional fee for the conveyancing work.
  • Disbursements that are part of your service (discussed below).
  • Any additional charges such as bank transfer fees, postage, or photocopying (unless they are genuine disbursements).

Example: Your firm charges a fixed fee of £1,500 for a standard residential purchase. You invoice the client £1,500 plus £300 VAT = £1,800 total. You then account for the £300 VAT to HMRC on your quarterly return.

What About Disbursements and VAT?

Disbursements are costs you pay on behalf of your client. The VAT treatment depends on whether the disbursement is a genuine disbursement (where you act as a pure agent) or a recharge of your own costs (where the supply is part of your legal service).

Genuine Disbursements (Outside the Scope of VAT)

If you pay a third party on your client's behalf and the client is the true recipient of the supply, you can treat this as a disbursement outside the scope of VAT. You do not add VAT when recharging it to the client. The third party's invoice should be addressed to the client (or you can reissue it clearly showing it is a disbursement).

Common genuine disbursements in conveyancing include:

  • Land Registry fees for registering the transfer or charge.
  • Search fees (local authority, drainage, environmental, etc.) where the search provider invoices the client directly or you pay as agent.
  • Stamp Duty Land Tax (SDLT) paid to HMRC on the client's behalf.
  • Bank transfer fees for CHAPS payments, if the bank charges the client directly.

Example: You pay a £50 Land Registry fee on behalf of your client. The Land Registry invoice is addressed to your client. You recharge £50 to the client with no VAT added. Your invoice shows: "Disbursement: Land Registry fee £50 (no VAT)."

Recharges of Your Own Costs (Standard-Rated)

If you incur a cost as part of delivering your legal service, even if you call it a "disbursement," it is a standard-rated supply. You must charge VAT on the recharge. Common examples include:

  • Bank transfer fees where your firm pays the bank and recharges the client (the bank's supply is to you, not the client).
  • Photocopying, postage, and courier charges that are part of your overheads.
  • Online search fees where you subscribe to a search provider and then recharge individual searches to clients.

Example: Your firm pays a £25 CHAPS fee to your bank for transferring the purchase funds. The bank's invoice is to your firm. You recharge £25 to the client. You must add VAT: £25 plus £5 VAT = £30 total. Your invoice shows: "Bank transfer fee £25 plus VAT £5."

Land Registry Fees and VAT

Land Registry fees are a common point of confusion. The Land Registry itself does not charge VAT on its fees. When you pay a Land Registry fee on behalf of your client, it is a genuine disbursement. You recharge the exact amount to the client with no VAT added, provided the invoice is addressed to the client or you clearly identify it as a disbursement.

Key point: If you combine the Land Registry fee with your own fee on a single invoice, you must clearly separate the disbursement from your standard-rated services. HMRC expects clear itemisation. A single line "Total fees including disbursements £X" is not sufficient.

VAT on Conveyancing Fees: Common Pitfalls for Solicitors

Here are the most frequent errors we see in law firm VAT returns:

  • Treating all disbursements as VAT-free. Only genuine disbursements where the client is the true recipient qualify. Recharges of your own costs are standard-rated.
  • Failing to charge VAT on bank transfer fees. Many firms treat CHAPS fees as disbursements. HMRC's view is that the bank's supply is to the firm, not the client, so VAT must be added on recharge.
  • Not separating disbursements on invoices. A single lump sum for "fees and disbursements" risks HMRC challenging the VAT treatment. Itemise clearly.
  • Overlooking VAT on referral fees. If you pay a referral fee to an introducer (e.g., an estate agent), the introducer's invoice will include VAT. You can reclaim that VAT if you are VAT-registered, but you must also account for output VAT on your own fee to the client.
  • Incorrectly treating SDLT as a disbursement. SDLT is a genuine disbursement (no VAT), but you must ensure the payment is clearly identified as such on your client invoice.

Partial Exemption and Conveyancing Firms

Most conveyancing is standard-rated, so partial exemption is rarely an issue for pure conveyancing practices. However, if your firm also handles exempt supplies such as arranging insurance or certain property finance work, you may need to consider partial exemption rules. The standard method is to apportion input VAT based on the value of taxable versus exempt supplies. If your exempt supplies are de minimis (less than £7,500 per year and less than 50% of total supplies), you can reclaim all input VAT.

If you are unsure about partial exemption, speak to a solicitor accountant who understands the nuances of legal practice VAT.

VAT on Commercial Conveyancing

Commercial conveyancing is also standard-rated for VAT. However, the transaction itself may involve VAT options. For example, the seller may have opted to tax a commercial property, meaning the sale price is subject to VAT. As the buyer's solicitor, you need to advise your client on whether VAT applies to the purchase price and ensure your own fee is correctly treated.

If you are acting for a VAT-registered client, they can reclaim the VAT on your fees as input tax, provided the property is used for taxable business purposes. This is a standard part of the transaction and should not cause issues if documented correctly.

Practical Example: A Typical Residential Purchase

Your firm handles a standard residential purchase for a client. The transaction involves:

  • Your professional fee: £1,500
  • Land Registry fee: £50 (genuine disbursement, no VAT)
  • Local authority search: £100 (genuine disbursement, no VAT)
  • CHAPS bank transfer fee: £25 (recharge, standard-rated)
  • SDLT: £2,500 (genuine disbursement, no VAT)

Your invoice to the client should show:

  • Professional fee: £1,500 plus VAT £300 = £1,800
  • CHAPS fee: £25 plus VAT £5 = £30
  • Disbursements (no VAT): Land Registry £50, search £100, SDLT £2,500 = £2,650
  • Total due: £1,800 + £30 + £2,650 = £4,480

You account for £305 output VAT to HMRC (£300 on the fee + £5 on the CHAPS fee). The disbursements are outside the scope of VAT.

Record Keeping for VAT on Conveyancing

HMRC expects you to keep clear records supporting your VAT treatment of disbursements. For each transaction, retain:

  • The third-party invoice showing the supply is to your client (or evidence that you paid as agent).
  • A copy of your client invoice showing the itemised breakdown.
  • Bank statements showing the payment to the third party.

If HMRC queries your VAT return, you need to demonstrate that each disbursement was genuinely incurred on the client's behalf. Poor record keeping can lead to assessments and penalties.

For more on compliance, see our COFA compliance support page, which covers VAT record keeping as part of broader regulatory obligations.

Changes in 2025/26 Affecting Conveyancing VAT

The VAT threshold remains at £90,000 for 2025/26. Making Tax Digital (MTD) for VAT is already mandatory for all VAT-registered businesses, so your firm must use compatible software for VAT returns. From April 2026, MTD for Income Tax will apply to self-employed solicitors with income over £50,000, which may affect sole practitioners and partners in LLPs.

There are no major changes to the VAT treatment of conveyancing fees in 2025/26. The rules remain as set out above. However, HMRC continues to focus on disbursement treatment in legal services. We recommend reviewing your invoicing practices annually to ensure compliance.

Final Thoughts

VAT on conveyancing fees is straightforward once you understand the distinction between genuine disbursements and recharges of your own costs. The key is clear invoicing and good record keeping. If you are unsure about any aspect of your firm's VAT compliance, speak to a solicitor accountant who specialises in legal practice VAT.

For further reading, see our guide on SRA Accounts Rules essentials, which covers client account handling alongside VAT considerations, or our calculators page for tools to estimate VAT liabilities on typical conveyancing transactions.