VAT and bills of costs – yet again

I had hoped never to have to mention the dread subject of VAT again.

But the inevitable has happened and the budget has raised VAT to 20% from 4 January 2011.

At the risk of repeating myself, this will mean that from 4 January 2011 bills of costs should usually be drafted with up to 4 sections and different rates claimed for each, regardless of when the matter settles:

Before 1 December 2008 – 17.5%
Between 1 December 2008 and 31 December 2009 – 15%
Between 1 January 2010 and 3 January 2011 – 17.5%
From 4 January 2011 – 20%

Of course, if you are lucky enough to be drafting a bill where some of the work stretches back to 1991 you will have a further period with 15% applying pre-1 April 1991. A bottle of champagne to the first reader who sends me a copy of a bill next year with 5 different VAT rates applied.

The amounts now at stake make it crucial to get this right.

One well known firm of law costs draftsmen (who shall remain nameless) has only just removed from the “latest news” section of their website information about the change in VAT rate. And they were referring to the 1 December 2008 decrease, not the 1 January 2010 increase.

Apparently, the other day at a detailed assessment, the thorny issue of the correct approach to VAT arose and the Legal Costs Blog was mentioned by one of the law costs draftsmen present (not someone from my firm) and the Regional Costs Judge duly proceeded to print off a copy of my last post on the subject for all to study.

I’m not sure quite what benefit was obtained from this but it reminds me of the story of the judge who had heard lengthy submissions from one of the advocates and informed him: “I’ve listened carefully to all you have to say but I am none the wiser”. To which the barrister replied: “Quite possibly Your Honour but you are now considerably better informed”.

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