An apparent 'stealth tax’ hike on housebuying has left conveyancing solicitors facing an uncertain Christmas.
The Law Society is today seeking urgent clarification from HMRC on unconfirmed reports that VAT will be imposed on searches conducted by local councils from 1 January - just six working days away. Chancery Lane warns this will create confusion and delays for both conveyancers and their clients.
Council searches provide information for buyers and lenders about matters including planning decisions, building regulation consents, highway information, road schemes and public footpaths.
They are carried out on the Law Society’s CON29 and CON29O forms, providing standardised questions to make conveyancing searches quicker and more efficient for both local authorities and property buyers.
The reason for addition of VAT is unclear, though it would appear to be intended to level the playing field between councils and private search organisations (PSOs), which already add VAT to searches they are instructed to conduct. A trade body representing PSOs has welcomed the move as a fait accompli, though Chancery Lane’s requests to HMRC for confirmation have gone unanswered.
'A lack of clarity around conveyancing processes and costs helps no one, and we are asking HMRC urgently to explain if, and if so, how and when, these changes will come into effect,’ said Law Society president Robert Bourns.
'A surprise new year’s tax hike will only create confusion and delays in the conveyancing process. With no public announcement from HMRC about these changes to fees, buyers and their lenders could face delays in getting the information they require. Even small delays in the home buying process can have big consequences, including the possibility of a sale falling through, causing enormous stress for consumers.’
He added: 'Property buyers and their solicitors need certainty.’
The Council of Property Search Organisations said it is 'pleased that the long-running saga about adding VAT to CON29 searches produced by local authorities has finally been resolved’, though its claim that an announcement to that effect has already been made appears unfounded.
James Sherwood Rogers, chairman of CoPSO, said: 'At least from 1 January our members will be able to compete on a level playing field when it comes to the provision of regulated personal searches to their customers.
'CoPSO has engaged with HMRC for many years seeking resolution to the unacceptable position whereby local authorities have enjoyed a price advantage in offering the CON29 to conveyancers and their clients.
'A level playing field between public and private sectors ultimately can only be to the benefit of homebuyers.’