VAT On Stamp Duty Reclaim Fees After Mudan Judgment

A VAT-registered stamp duty reclaim firm usually must charge VAT on its fees, even if it offers a discount.

  • VAT is law, not a choice – If the firm is VAT-registered, its reclaim work is normally standard-rated, so VAT must be added.
  • They can cut the fee, not the VAT – They may reduce their basic fee so the total you pay is lower, but VAT is still calculated on that reduced fee.
  • What you should do – Check your contract and invoice breakdown, then query any misunderstandings and, if needed, seek independent advice.

Scroll down for the full analysis.

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Can a stamp duty refund adviser remove VAT from their invoice if they agreed a discount?

Introduction

People often ask whether VAT can be removed from a professional fee after a tax refund has been secured, especially where there was an earlier discussion about a reduced charge. This usually comes up after HMRC has paid a refund and the adviser then issues an invoice for their fee.

The key point is that a VAT-registered business cannot simply choose not to charge VAT on a taxable service. What it can do is reduce its underlying fee, which then reduces the VAT charged as part of the new total.

The Question

A homeowner received an SDLT refund from HMRC after a reclaim relating to a residential property purchase. The refund adviser then issued an invoice for its agreed fee. The homeowner queried the invoice because they believed that, during an earlier discussion, VAT would not be charged.

The adviser later explained that the invoice would be reissued at a discounted amount, but that it would still include a VAT element because VAT had to be applied. The practical question is whether that approach is correct.

Nick’s Explanation

Nick’s explanation was straightforward: the invoice could be reduced, but VAT still had to appear on it. In anonymised form, his point was:

“The invoice will be a discounted amount, but will have a VAT element, because we must do that.”

He then illustrated the difference between reducing the price and removing VAT altogether. Using round figures, he explained that:

  • an original invoice of £1,200 could be made up of £1,000 fees plus £200 VAT; and
  • a revised invoice of £1,000 could instead be made up of £833.33 fees plus £166.67 VAT.

That is the correct VAT treatment in principle. A business that is required to charge VAT can discount its net fee, but the VAT must still be calculated on the reduced taxable amount.

The Law

VAT is charged under the Value Added Tax Act 1994 on taxable supplies made in the United Kingdom by a taxable person acting in the course or furtherance of business.

Where a business is VAT-registered and provides a standard-rated service, VAT is due on the value of that supply unless a specific exemption or relief applies. Professional tax advice and reclaim services are generally standard-rated supplies, not exempt supplies.

The amount on which VAT is charged is the consideration for the supply. If the supplier gives a genuine discount, the taxable value is reduced accordingly. But that is different from saying that VAT is not chargeable at all. If VAT applies, it applies to the discounted fee.

In practice, that means:

  • the supplier may reduce the net fee;
  • VAT is then calculated on that lower net fee; and
  • the customer pays the reduced gross total, which still includes VAT.

A supplier cannot normally agree to “waive VAT” if VAT is legally due. At most, it can agree that the total amount payable by the customer will be lower, with the reduction absorbed into the supplier’s own fee.

Analysis

The issue can be analysed in four steps.

  1. First, identify the nature of the service. A service involving advice or assistance in obtaining an SDLT refund is generally a taxable professional service.

  2. Second, ask whether the supplier is VAT-registered and making a standard-rated supply. If yes, VAT must be charged unless a specific exception applies.

  3. Third, distinguish between the total invoice and the VAT element. If someone says “I will not charge you the VAT”, that may reflect a commercial misunderstanding. Legally, the supplier cannot simply strip VAT out if the service is taxable. What the supplier can do is lower the fee so that the final amount payable is reduced.

  4. Fourth, check the arithmetic. If the original fee was £1,000 plus VAT, and the supplier agrees to cap the total at £1,000 instead, that does not mean VAT disappears. It means the net fee is recalculated so that, once VAT is added, the total comes to £1,000.

That is exactly what Nick’s example showed. The revised invoice remained VAT-inclusive, but the underlying fee was reduced to reach the lower overall figure.

Outcome

Yes. The adviser’s approach was correct in principle. If the service was subject to VAT, the invoice still needed a VAT element. The proper way to honour a discount was to reduce the adviser’s fee and recalculate VAT on that reduced amount, not to remove VAT altogether.

So if a customer believed they had been promised “no VAT”, the practical legal answer is usually that the supplier may reduce the total charged, but cannot lawfully treat a taxable supply as if VAT were not due.

Practical Steps

If you are in this position, it helps to do the following:

  • ask for a revised VAT invoice showing the net fee, VAT and total separately;
  • check whether the business is VAT-registered;
  • look back at the original agreement to see whether the discussion was about the total fee rather than the legal VAT treatment;
  • confirm whether the discount was meant to reduce the gross amount you pay or the net fee before VAT;
  • keep copies of emails or messages showing what was agreed about fees; and
  • if the numbers are unclear, ask for a simple worked example of the calculation.

Where the dispute is only about wording, it is often resolved by reissuing the invoice at a lower total while keeping the VAT treatment correct.

Conclusion

A VAT-registered SDLT refund adviser cannot usually remove VAT from a taxable invoice just because a customer expected a concession. What the adviser can do is reduce the underlying fee. If that happens, the invoice should still show VAT, but on the lower amount.

Legal References Used

  • Value Added Tax Act 1994

This page was last updated on 22 March 2026.

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