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VAT Commentary
Note: This Practice Note has been replaced by an updated Practice Note available here: VAT treatment of pre-payments received by Solicitors
Appendix 3 (para 5) of the VAT Commentary outlines the tax treatment of pre-payments for services where the service itself may not be completed until a later date viz. S19 (2) of the Act requires that VAT must be accounted for on the pre-payment where it is lodged to the solicitor's office account.
However, this situation does not arise for solicitors as the Solicitors' Accounts Regulations require that pre-payments (e.g. retainers, counsel's fees etc.) be lodged to client account until the costs have become properly due by reason of the relevant work or professional commitment having been rendered.
