VAT on CON29 searches to be applied from 4th July

HMRC have agreed to delay adding VAT to Local Authority CON 29 searches until 4th July.

Today’s Conveyancer understands the Chartered Institute of Public Finance and Accountancy (CIPFA) have made a submission to HMRC with regards to keeping the searches VAT free with the decision expected by the 4th July implementation date.

The new implementation date also coincides with wider changes to the CON 29 form.

A statement from Michael Revis, the Chair of the CIPFA VAT committee read: “HMRC have agreed to delay the implementation of VAT on Local Authority CON 29 services until 4th July 2016. This date coincides with wider changes to the CON 29 form.

“In the meantime HMRC are still considering the CIPFA submission for continued non-business treatment. A response is expected prior to the 4th July 2016 implementation date.”

It is still unclear what local authorities plan to do in response to the charge when it comes to pricing, with some planning to add the 20% charge, some saying they will absorb, and some will use the opportunity to review their entire pricing structure.

It was initially revealed that VAT would be added to CON 29 searches in minutes from the committee meeting dated 5th November.

The minutes said: “HMRC’s view is that when a local authority provides refined data (CON 29(R) and CON 29(O)) in answer to enquiries made of it, the authority enters into a contractual relationship with the enquirer in the same way that a commercial property search company does.

“Regulation 8(1) of the Local Authority (England) (Charges for Property Searches) Regulations 2008 permits a charge to be made for the service and this charge is at the discretion of the authority (Regulation 8(2)).

“In these circumstances HMRC does not consider that a local authority engages as a public authority in relation to this activity and thus Section 41A of the Value Added Tax Act 1994 does not apply.

“Therefore the provision of refined data is subject to VAT at the standard rate. David confirmed that unless the Committee makes representations responding to the points in his letter, local authorities will have to start charging VAT.”

Today's Conveyancer