Increase in standard search fees for property purchasers

Following the hefty changes at the end of March to Stamp Duty Land Tax which massively and adversely affected investors and purchasers of second properties, a government move set to come into force in only a few weeks’ time, will again hit property purchasers in the pocket.  The Revenue is due to introduce standard rated VAT on all local authority searches from July 2016. 

The current position is that enquiries of the local authority, which is a “standard search” in the conveyancing process (and often seen as “mandatory search” when third party finance is involved), does not attract VAT.  However the exemption of local authority searches from value added tax shall cease in July with the introduction of VAT on the CON29 element of local searches.

Originally proposed to be introduced in February 2016, the Revenue delayed implementation in order to allow local authorities sufficient time to prepare properly for the new search arrangements.  The revised date of 04 July coincides with the introduction of The Law Society’s revised CON29 form.  The aim of the revisions, is to improve the quality and consistency of information provided by local authorities.

The Chartered Institute of Public Finance and Accountancy or CIPFA for short, the body that represents central and local government finance professionals has suggested that the move be further delayed by continuing to adopt the non-business treatment for the search.  Should CIPFA’s submission fail then local authorities shall be required to charge VAT from next month.  At this stage, few authorities have gone on record as to whether they will absorb the extra cost, or simply pass on the 20% VAT charge onto end-purchasers.

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