Revenue Information Note

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1. Introduction

This information leaflet sets out the treatment of solicitors in relation to VAT. It updates and replaces information leaflets of the same title issued in prior years.

2. Which solicitors have to register for VAT?

All independent solicitors (that is, solicitors who are not employees) are obliged to register for VAT, if their annual turnover from the supply of taxable services exceeds or is likely to exceed €37, 500 (from 1/5/08). ‘Turnover’ consists of professional fees together with ‘all taxes (excluding VAT itself), commissions, costs and charges whatsoever’ which a solicitor is entitled to receive. State Solicitors are not obliged to register in respect of their activities as State Solicitors. However, they are obliged to register if their annual turnover from other professional activities exceeds or is likely to exceed €37, 500 (from 1/5/08). Applications for registration are made using Form TR1, which is available on the Revenue website under Business & Self Assessment/Popular Forms

3. Obligations of VAT-registered solicitors

VAT-registered solicitors are obliged to;

  • keep sufficiently detailed records to enable their liability as declared by themselves to be confirmed;
  • issue invoices in respect of taxable services supplied to other VAT-registered persons; [If the consideration payable in respect of the supply of taxable services which is shown on an invoice is subsequently reduced, a credit note must be issued if the client is a VAT-registered person. Copies of invoices and credit notes must be retained.]
  • submit, every two months, a return of their outputs and purchases together with a remittance for any tax due. Solicitors may have the choice of paying VAT on the basis of services supplied or moneys received.

4. Records to be kept

Details of the records which solicitors are obliged to keep are given in the Revenue Guide to Value-Added Tax. The records need to be in such a form and contain such information as is necessary to confirm that the amounts entered in a solicitor’s VAT return or series of VAT returns are correct. The records need to distinguish by VAT rate between taxable, exempt and non-taxable output and taxable inputs.

5. Confidentiality & Examination of Records

The general supervision of the operation of the VAT system by Revenue is effected by means of periodic visits by Revenue officers to taxpayers’ premises.

Examination of records is normally carried out by Revenue officers from the Revenue District dealing with the solicitor’s tax affairs. The purpose of examination is to ensure that records are maintained in accordance with the VAT Acts and Regulations and that the records systems used are adequate to give the correct VAT payable by, or repayable to, the taxpayer. Examination covers both a check of the returns which have been made against the actual records, an examination of the records kept and a check of invoices issued and received.

Please see Appendix 1 which details the Memorandum of Understanding between the Revenue Commissioners and the Law Society of Ireland concerning the Audit of the tax returns of Solicitors and Solicitors Practices.

6. Rates of VAT

Almost all services supplied by solicitors are liable to VAT at the standard rate. The principal exceptions are the following:


  • collection of insurance premiums
  • letting of solicitor’s own premises (short-term)

Zero per cent

  • services connected with property situated outside the State (see paragraph 12(a))
  • Fourth Schedule services (see paragraph 12(b))

not taxable

  • Directors’ fees; Commissioner for Oaths fees; Notary Public fees

7. Taxable Amount

7.1 The amount on which a solicitor is liable, and the amount by reference to which a solicitor is or is not obliged to register, is the amount of his/her professional fees together with ‘all taxes (other than VAT), commissions, costs and charges whatsoever’ which the solicitor is entitled to receive in respect of or in relation to the supply of his or her services. Outlays made by a solicitor on behalf of a client are not regarded as part of the solicitor’s charges and are not, therefore, taxable. Expenses incurred by a solicitor in the course of, and for the purposes of, carrying out his or her professional services are regarded as part of the solicitor’s charges and are taxable.

7.2 Those outlays which are not liable to VAT in the hands of a solicitor include:

  • Advertising
  • Company Registration, etc. Fees including Company Seals
  • Counsels’ Fees (see note in paragraph 7.3)
  • Court Fees and Fines
  • Deposits (such as house deposits paid by clients)
  • Land Registry Fees
  • Photographs of Court Exhibits
  • Registration of Deeds Fees
  • Search Fees
  • Stamp Duty and other duties and taxes
  • Surveyors’ and Estate Agents’ Fees
  • Valuation Services (by actuaries and Valuation Office)
  • Witnesses’ Fees and Expenses.

7.3 Where it is practicable for these outlays to be invoiced directly by the supplier to the client (although transmitted through the solicitor) the solicitor may not be involved at all, but it is most important for the solicitor to ensure that all invoices relating to such transactions are in the name of the client. If they are not, the client, if he or she is a VAT-registered person and there is an amount of VAT invoiced, will not be entitled to a deduction for the tax. (NOTE re Counsels’ fees: When Counsel has received payment of fees he or she will issue to the instructing solicitor, at the solicitor’s request, a combined VAT invoice/receipt drawn up in the name of the client).

7.4 Those expenses which are regarded as part of a solicitor’s charges for professional services and which are liable to VAT include:

  • Courier Fees.
  • Hire of consultation rooms from Incorporated Law Society (exempt if charged out separately by solicitor).
  • Hotel costs, photocopying, postage, summons serving fees, telephone, town agent fees, travelling costs.

8. Deduction for VAT charged on purchases

8.1 A VAT-registered solicitor is entitled to take a credit or deduction (i.e. set off against his or her liability) for most VAT properly invoiced to him or her by suppliers. The solicitor does not have to have paid the suppliers to be entitled to the credit.

8.2 The only expenditure in respect of which a tax credit may not be taken is expenditure relating to:

  • the provision of food, drink, accommodation or other personal services for the solicitor or his or her agents or employees (for example, hotel costs);
  • entertainment expenses;
  • the purchase, hire or leasing of a car or other road passenger vehicle;
  • the purchase of petrol;
  • an exempt (for example short-term letting of premises) or non-business activity;
  • VAT incurred prior to registration.

8.3 A credit or deduction may be taken in respect of diesel, LPG, car repairs and maintenance, and car parts (for example, a set of tyres), subject to the condition that they are used for the purposes of a taxable business.

9. Accounting for Tax

The normal basis of accounting is the invoice or sales basis. A VAT-registered solicitor using this basis of accounting is liable to pay VAT by reference to services supplied. VAT is not chargeable on services, which are completed before the date of registration no matter when the relevant invoice is issued. Services that are not completed before the date of registration will not be chargeable to VAT to the extent that they are paid for (that is, that the solicitor’s office account has been credited) before that date.

10. Moneys Received Basis of Accounting

10.1 An alternative basis of accounting is the moneys received or “cash” basis. This is available to solicitors whose annual turnover does not exceed and is not likely to exceed €635,000, or, as on and from 1 March 2007, €1 million, or where not less than 90% of the turnover is derived from unregistered persons. To avail of the moneys received basis, a solicitor needs to indicate this specifically on form TR1 when applying for VAT registration or at a later time if he or she wishes to change the basis of accountability from invoice to monies received basis.

10.2 A solicitor who opts to use the moneys received basis is liable for tax at the rate in force at the time the services are supplied on all moneys received in each VAT period excluding moneys received in respect of exempt services and payments on which VAT has already been accounted for if previously on the invoice basis of accounting. Monies received in respect of services supplied during the period prior to registration are not taxable.

10.3 Moneys received by a VAT-registered person include any sums:

  • credited to the person’s account in a bank or other financial concern,
  • received by a solicitor on behalf of the person, or
  • paid to Revenue by a third party to his/her account in accordance with certain provisions of the Tax Acts.

A VAT-registered person is also deemed to have received money if liability in respect of a business transaction is settled by setting off against it a credit due in respect of some other transaction. Care must be taken when money is received through an agent that any amount withheld by the agent to cover fees, expenses, etc., is included in the taxable amount.

10.4 Moneys received are treated as being inclusive of VAT and only the tax-exclusive content is taxable. If, for example, a solicitor accounting on the moneys received basis were to receive, say, €10,000 in a taxable period, the solicitor’s liability would be €1736, that is €8,264 at 21 per cent.

11. Withholding Tax - Professional Services

Income Tax withheld from payments for professional services is deemed, for VAT purposes, to have been received by the solicitor. If, for example, payment of an amount due to a solicitor is reduced from €1,210 (€1,000 + €210 VAT) to €1,010 (€200 withheld for Income Tax (20% of the net)) the solicitor is for VAT purposes deemed to have received €1,210 and must account for VAT on the full amount of €1,210.

12.Place of supply of services

Place of Supply rules up to 31 December 2009

Up to 31 December 2009 as a general rule the place of supply of services was the place where the person supplying the services has established his business. However, as an exception to this general rule and in common with other services listed in the Fourth Schedule to the VAT Act, the place of supply of legal services was determined by the status and location of the recipient of the services.

Legal services supplied by a Lawyer established in Ireland to any person in Ireland or to any non-business person within the EU were deemed to be supplied in Ireland and were liable to Irish VAT. Legal services supplied by Irish Lawyers to business persons (whether they are registered for VAT or not) outside Ireland were deemed to be supplied at the place where the customer has a business establishment.

Place of Supply rules from 1 January 2010

S.I. No. 520 of 2009 amending the VAT Act 1972 gave effect to significant new EU VAT legislation on the place of supply of services which came into operation on 1 January 2010.

In the case of legal services the new rules are broadly similar to those, set out above, that operated for periods up to 31 December 2009. As will be the case with most services supplies of legal services made in Ireland and received by taxable persons in other Member States of the EU are, with effect from 1 January 2010 taxable where those persons have established their business. Similarly services received in Ireland by taxable persons are taxable here.

Where taxable supplies are made to a taxable person within the EU there is now a requirement for the supplier in Ireland to report the details by completing a return for the VIES (VAT Information Exchange System).

Where supplies are made to taxable persons established outside the EU no Irish VAT liability arises and there is no requirement to report the transaction on the VIES.

The new rules are explained in detail in the Information Leaflet Place of Supply of Services.

Further information

Enquiries regarding any issue contained in this Information Leaflet should be addressed to the Revenue District responsible for the taxpayer’s affairs. Contact details for all Revenue Districts can be found on the Contact Details Page.

VAT Interpretation Branch,
Indirect Taxes Division,
Stamping Building
Dublin Castle.

August 2010


Memorandum of Understanding between the Revenue Commissioners and the Law Society of Ireland concerning the Audit of the tax returns of Solicitors and Solicitors Practices

1. The Purpose of this Memorandum of Understanding

The purpose of this memorandum of understanding is to clarify certain procedural matters that may arise in the audit of the tax returns (Income tax, Capital Gains tax, VAT, PAYE/PRSI, 3rd Party returns etc.) of solicitors and solicitors’ practices.

2. Audit Focus

The primary purpose of the Revenue audit of solicitors or solicitors’ practices is the audit of the tax returns of the individual solicitor or partnership, or both, as the situation demands. In carrying out these audits Revenue officials will not be collecting, collating or verifying client information.

However, Revenue audit programmes include verifying or cross checking tax related financial information on transactions from one taxpayers business records to those of another taxpayer. Similar checks are carried out in all businesses.

3. Information or professional advice of a confidential nature given to clients is not sought by Revenue Auditors

Confidential information which does not have a bearing on the tax liability of any solicitor is not sought by Revenue officials.

Revenue officials fully recognise the concept of legal advice privilege (Footnote 1) and litigation privilege (footnote 2).

Revenue officials are entitled to access the names and addresses of clients subject to the exclusions as described at footnote (footnote 3)

Tax legislation obliges solicitors to give authorised Revenue officials access to books, records and other documents, information and explanations for the purposes of verifying the tax liabilities of any individual solicitor or practice. Revenue officials are also entitled to reasonable assistance in this regard.

4. Special Cases

In addition to paragraph 3, in certain limited situations, where there are exceptionally sensitive issues, a solicitor may request that either the name and address of the client, or certain aspects of the case, should not be disclosed. Revenue officials will agree to conduct the audit without the client’s name and address or the issues being revealed, provided the non disclosure does not restrict the audit process, and that sufficient meaningful information is supplied to the Revenue official to enable the tax issues to be verified.

Bearing in mind the confidentiality obligations on Revenue officials, it is expected that situations where this clause might be invoked will be exceptional.

Where there is disagreement regarding disclosure in these circumstances, the solicitor may request a review by the Principal Officer to whom the Revenue official reports or a review by the internal/external reviewers in accordance with Statement of Practice S.P. Gen 2/99 (Revised January 2005).

5. Access to books, records, documents and information and explanations relating to tax.

Revenue officials will seek access to books, records, documents and information and explanations relating to tax so as to verify the amounts of professional income and other income earned within a specified period, and also to verify the correct accounting for VAT and the correct operation of PAYE/PRSI.

Broadly in general terms, access is sought, where appropriate, to the following:

  • The underlying records (cash book, cheque journal, etc.), the accounts linking papers which link the underlying records to the annual accounts, including Trial Balance, Nominal Ledger, Journal entries, Bank account reconciliation, client Ledger balances reconciliation and reconciliation of opening and closing accounts balances.
  • Records relating to fees receivable and profits earned, the timing of earnings, valuations of debtors and work in progress, timely transfer of costs to office account, treatment of clients outlay, treatment of office and personal expenditure, reconciliation of clients balances with balances in clients bank accounts.
  • Access is sought to individual client’s ledger accounts, correspondence, information and explanations so as to verify figures in the accounts, the status or timing of some transactions such as the source or destination of sums passing through the client ledger accounts, the commencement and ending of separate steps in litigation or other services giving rise to payment of fees, the valuation of work in progress, the determination of bad debts and other income or expense related transactions.
  • Records and documents relevant to VAT.
  • Records of employee emoluments relevant to PAYE/PRSI.
  • all bank accounts (current, loan, deposit etc.) - client accounts, office accounts (including paid cheques) and private accounts.
  • Computations of taxable profits and distribution of profits among the partners.
  • Documents relating to various claims to relief and allowances.
  • The correct accounting for any relevant tax under any provisions of the Taxes Acts.

The above is an indicative list only and other records etc. may be required depending on the circumstances of any particular case.

Access is sought only to such practice correspondence that is likely to assist in verifying issues such as checking the timing of transfer of fees to office account, valuation of debtors and work in progress, verifying creditors and other income or expense related transactions. Where files are sought the solicitor may remove from the files, where relevant, items attracting legal advice privilege, litigation privilege and details of tax advice given to clients.

Where there is disagreement regarding disclosure in these circumstances the solicitor may request a review by the Principal Officer to whom the Revenue official reports or a review by the internal/external reviewers in accordance with Statement of Practice S.P. Gen 2/99 (Revised January 2005).


It is agreed that this Memorandum of Understanding will be reviewed as necessary, and in any event after two years in operation.

Position re Non-Production of Records to Date

It is accepted by Revenue that the non-production of records in the course of an audit which commenced prior to 28 February 2002, on the basis that the solicitor was of the view that privilege applied, will not count as non co-operation for the purposes of penalty mitigation.

Note 1: Legal Advice Privilege: The basic rule is that communications between a lawyer in his professional capacity and his client are privileged from production if they are confidential and for the purposes of seeking or giving legal advice to the client. It does not apply to legal assistance which covers many tasks which a solicitor carries out for clients.

Note 2: Litigation Privilege The basic rule here is that communications, after litigation has been commenced or after litigation has been contemplated, between (a) a lawyer and his client, (b) a lawyer and his non professional agent or (c) a lawyer and third party, for the sole or dominant purpose of such litigation (whether for seeking or giving advice in relation to it, or for obtaining evidence to be used in it, or for obtaining information leading to such obtaining), are privileged from production.

Note 3: Exceptional Circumstances In addition to the privilege items outlined in the preceding footnotes account will also be taken of Mr. Justice Kelly’s dicta in Miley v Flood [HC 2000 No. 310 J.R. (Kelly J) 24 January 2001]; “...... a solicitor is not entitled to maintain a claim to privilege in respect of the identity of his client. A dilution of this general principle arises where (a) the naming of the client would incriminate or (b) where the identity of the client is so bound up with the nature of the advice sought, that to reveal the clients identity would be in fact to reveal that advice”.


Neither the Law Society nor the Revenue Commissioners accept any responsibility for any errors, omissions or inaccuracies herein nor for any loss arising to anyone as a consequence of acting or refraining from acting in reliance on the information herein contained. Readers are advised to obtain professional advice and guidance as appropriate.