Property Search – FAQs
Will we need to issue VAT receipts to CON29 search customers?
Under VAT regulations, if a standard rated or reduced rated taxable service is supplied to a VAT registered customer, a VAT invoice must be issued; where the value of the services is less than £250 (inclusive of VAT), a less detailed VAT invoice can be produced.
As many customers for CON29 searches will be VAT registered solicitors or conveyancers, it might be advisable to issue VAT receipts as a default position.
Do we need to retain VAT receipts issued for CON29 searches?
Yes, the same document retention requirements apply for output tax and input tax. The basic requirement is that a copy of the VAT receipt will need to be retained (either in hard copy of electronic form) for a period of six years.
Many of our customers use online search providers who conduct the searches as the Council’s agent. The customer pays the Council’s search fee to the agent who, in turn, passes the fees to the Council. Who will be responsible for issuing VAT receipts to customers who use this service?
As the Council is still providing the service from a contractual view point, the responsibility to provide a VAT receipt remains with the Council. However, arrangements can be put in place so that the Agent automatically issues a VAT receipt in the Council’s name (and showing the Council’s VAT number) to all of the Council’s customers.
Where an online search agency is used and VAT is added to the Council’s charges by the agency, does the agency account for the output tax to HMRC?
No, the Agency is collecting the VAT in the Council’s name and passing the VAT inclusive income onto the Council. The Council must ensure that it accounts for the output VAT through its VAT return.
What is the tax point for the CON29 fees?
Where the fees are to be received in advance of the supply of the search information, the actual receipt of the customer’s payment will be the date upon which the Council must account for output tax.
We (the District Council) have to obtain some of the CON29 information from the County Council. Should the County Council be charging us VAT for this information from 1 February 2016?
Yes, the County Council will be making taxable supplies when providing this information for a fee. The County Council should issue a VAT invoice so that the District Council can recover the VAT. This cost then becomes part of the District Council’s taxable supply of CON29 search services.
Property Searches – CON29 Charges– From 1 February 2016
Local authorities maintain registers that contain a wide range of property information. These registers can be inspected by the public without charge, but local authorities have traditionally offered a search service as the data on the registers is generally in a somewhat ‘raw’ or ‘unrefined’ state. These search services are frequently used as part of a conveyancing service when people buy or sell property. Many of the local authority’s customers are therefore solicitors or professional conveyancers.
To speed up the process and reduce delays, the Law Society (acting for its members the Solicitors) and the Local Government Association (on behalf of the local authorities) agreed a standardised list of questions that would be asked when requesting property searches; these standard questions are known as CON29 enquiries.
In the past these charges have been regarded as outside the scope of VAT on the presumption that only the local authorities could provide the service.
But this is not how one decides whether VAT is chargeable when a local authority raises a direct charge for its services.
The first question is whether the local authority is acting as a public authority when it provides a service, and this means is there a special legal regime (a specific piece of legislation) that places the local authority under unique conditions and either compels it or controls its activity in a way that a private ‘competitor’ would not be?
The second question (which only needs asking if a special legal regime does exist), is whether there would be a significant distortion of competition with a private competitor if the local authority was not required to charge VAT?
With regard to the CON29 searches and as reported at the CIPFA VAT Committee in November 2015, HMRC has concluded that there is no special legal regime that compels a local authority to undertake a search of its property registers.
The lack of a special legal regime means that when a local authority charges for the CON29 search service it is not doing so as a public authority and so the activity cannot be regarded as outside the scope of VAT. It is instead a business supply and so standard rated VAT should be accounted for.
Although this has effectively always been the legal position, HMRC is not seeking to recover output tax from past supplies.
HMRC has set the date of 1st February 2016 for when it expects all local authorities to implement the changes and commence accounting for standard rate VAT on all CON29 charges.