VAT: the one tax that is supposed to be unavoidable, unless of course we are talking about it being applied to local authority searches. The will-it won’t-it saga of January has now been put back to later in the year. But before the postponement was announced, tm asked its customers, “With VAT potentially being added to the cost of CON29 reports from February 1st or are you now more likely to order Regulated or Official Searches?”
Interestingly only 4% of respondents stated they were going to make a swap from official to regulated and, even if the 17% of ‘don’t knows’ are added in, the impact of a 20% price increase has swayed only 1 in 5 conveyancers to consider which type of local search they use. But there is also a large proportion who are insulated from the introduction of VAT as they either exclusively use regulated searches (33%) or mix-and-match between regulated and personal (17%). So this only leaves 1 in 3 respondents currently sticking to official searches.
There is the potential for a wide range of different scenarios to play out at each Local Authority when VAT is introduced. Perhaps prices will rise by VAT and that will be that but Local Authority fees vary hugely. If you are fortunate to conduct your transactions where official searches are around £60 then the addition of £12 is not such a big issue. If however you are at the other end of the price scale and are paying upwards of £250 the extra VAT is very close to the price of a regulated search. I wonder what impact that may have on what choices are offered to clients?
Having spoken directly to some the option to reduce the search fee so that new VAT price is the same as the old non-VAT price is under consideration. And despite the postponement from the 1st February it is probable that on all Local Authorities will uniformly add VAT from the new go-live date. If you operate across different Local Authorities then you may find the situation where one has added VAT and the other hasn’t.
As with any change there is a degree of uncertainty as to how seamlessly it is introduced and what potential disruption it may have to customers as conveyancers are in the service business and efficiency is a key part of good service.
To ensure the introduction of VAT onto official searches, on whatever timescale and in whatever way, is a hassle free for you and you customer the following points may be useful to bear in mind:
1. Is there a wide choice of regulated search providers alongside official searches available for me to choose from and turnaround times can vary significantly?
2. Can my supplier cope with Local Authorities adding VAT on different dates and display the costings accurately?
3. Will their quotes and billing be affected by these changes?
The final point is that there will inevitably be issues with searches that are submitted before VAT is applied but are queried or rejected for some reason and on resubmission will have VAT applied. This will of course create service issues so make sure your search provider can cope with this.