VAT for Advocates - Alterledger

There is specific guidance from HMRC on accounting for VAT for advocates. VAT notice 700/44 was updated on 20th May 2022. The change was only to update a contact address, but with an increase in people leaving work it is a good time to consider the VAT implications of leaving your practice as an advocate.

VAT for advocates and barristers

The Faculty of Advocates and Bar Council were involved with the drafting of the The Value Added Tax Regulations 1995. As a result of their discussions, advocates get a special mention in section 92 of the Statutory Instrument:

Services supplied by a barrister, or in Scotland, by an advocate, acting in that capacity, shall be treated as taking place at whichever is the earliest of the following times

when the fee in respect of those services is received by the barrister or advocate,
when the barrister or advocate issues a VAT invoice in respect of them, or
the day when the barrister or advocate ceases to practise as such.

Devils calling in June

If you currently preparing to be an advocate, VAT is something you can sort out before your calling date. See the articles pre-trading expenses and VAT intending trader.

Alterledger can register you in advance of trading. You are also required to register for Making Tax Digital (MTD). HMRC are in the process of updating their systems.

Before the end of 2022 new VAT registrations should be on MTD by default, but until that time registering for VAT is a two stage process. If you miss out the second stage you won’t be able to file your returns under the new regime that was introduced in April.

Advocates ceasing their practice

Whether or not you believe in the Great Resignation, your practice will cease eventually. The process of unwinding the practice can be complicated in relation to VAT. In the absence of any other taxable supplies for VAT, an advocate is required to cancel their VAT registration. The cash rule above no longer applies when you cease as an advocate. All VAT in your fees becomes payable to HMRC on the date you stop being an advocate.

How Alterledger can help

Alterledger can set up digital accounting systems, linked to your bank account. We use Xero and Dext to maintain digital records that comply with HMRC Making Tax Digital requirements.

Alterledger can register you for VAT as an intending trader, set up your VAT process and reclaim all the input VAT you incur in advance of trading. Setup costs can be significant; revering the VAT will have a positive impact on your cashflow, which is a boon to any start-up.

Get in touch with Alterledger today using the contact form below to arrange an appointment and find out how we can help you to launch your business.