VAT on medical fees

The Law Society Gazette recently reported on HMRC’s decision requiring solicitors to charge VAT on medical reports on the basis that they are obtained to provide a legal service and can no longer be treated as disbursments that were not subject to VAT.  The Law Society is to make written submissions in a forthcoming VAT tribunal case on this issue in Barratt Goff & Tomlinson (BGT) v The Commissioners for HMRC.

This ties in with the decision Makuwatsine v Trathens Travel Services Limited (view judgment) where it was held that VAT should be charged by solicitors on any medical records obtained and that they were not VAT exempt disbursements. 

It is not long ago that all medical reports and records were treated as VAT exempt disbursements. 

These developments may be good news for a cash-strapped government but are hardly good news for defendants. 

There is also concern among law costs draftsmen assuming this is retrospective.  Solicitors will be liable for VAT on medical disbursements where no VAT may have been claimed from the paying party.  This could lead to solicitor clients seeking reimbursement of the VAT from the law costs draftsmen who prepared the bill as the VAT had been wrongly omitted.