CRIME — Costs — Disbursements — Value Added Tax — Payments made to third parties for supply of goods and services by legal representatives or litigants — Whether VAT to be included in assessment of costs

Practice Direction (Value Added Tax on Disbursements: Amendment to Practice Direction (Criminal Proceedings: Costs))

Sup Ct: Sir Igor Judge P: 30 November 2007

The text of a new Pt XIV.6 of the Practice Direction (Criminal Proceedings: Costs) [2004] 1 WLR 2657, which was to be substituted for the existing Pt XIV.6, was set out. The amendment was to take effect on 3 December 2007.

SIR IGOR JUDGE P said that this practice direction amended Pt XIV of the Practice Direction (Criminal Proceedings: Costs) handed down by the Lord Chief Justice on 18 May 2004 and set out a new Pt “XIV.6, Disbursements”, to be substituted for the existing Pt “XIV.6, Disbursements”. The new Pt XIV.6 provided that the question whether legal representatives or litigants should include VAT in respect of payments made to third parties for the supply of goods and services where no VAT was chargeable on the supply by the third party, should be decided in accordance with the direction set out there and with the criteria set out in the VAT Guide (HM Customs and Excise Notice 700). Payments to third parties normally treated as part of the legal representative’s overheads (for example postage and telephone costs) would not be treated as disbursements. The third party supply should be included as part of the costs of the legal representative’s legal services and VAT must be added to the total bill charged to the client. Some payments, although correctly described as disbursements for some purposes, were not classified as disbursements for VAT purposes, and had to be shown as part of the services provided by the legal representative and VAT added in respect of them, whether or not VAT was chargeable on the supply by the third party.

Appearances: Not listed

Reported by: Sharene P Dewan-Leeson, barrister