VAT reclaim and HMRC

Reclaiming VAT on Professional Fees

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Professional fees are the quiet VAT item on a property deal. They are smaller than the purchase VAT, they arrive in instalments from different firms, and they are where claims most often go wrong on technicalities.

VAT on fees is independent of VAT on the property

A point that confuses people: the property can be exempt while the fees are standard-rated.

Solicitors, agents, surveyors and planning consultants are supplying services, and those services are generally standard-rated regardless of the VAT status of the building.

So on an exempt purchase with no VAT at all, you may still incur VAT at 20% on £25,000 of professional fees — £5,000 of input tax, which is recoverable or not depending on your position.

What determines recovery

The same test as any other input tax: does the cost relate to taxable supplies?

Note the fourth row. A buyer of an exempt commercial property who does not opt to tax may be unable to recover VAT on their professional fees, because the intended supplies are exempt. This is one of the quieter reasons owners opt.

The invoice problems

These cause more rejected claims than the underlying entitlement does.

Addressed to the wrong entity. Invoices made out to a director personally, to the parent company, or to an SPV that was renamed mid-transaction. The claim should be made by the entity the invoice is addressed to.

Issued before the entity existed. Early advice is often billed before the SPV is incorporated. There are pre-registration and pre-incorporation considerations, but it is cleaner to get the entity in place early and invoiced correctly.

Not a valid VAT invoice. A fee note or a statement is not necessarily a VAT invoice. It needs the supplier's VAT number, the date, a description and the VAT charged.

Disbursements mixed with fees. Solicitors' bills often combine their own services with disbursements. The VAT treatment can differ across the elements, so the bill should be clear enough to separate them.

Abortive costs

Deals fall through, and the fees remain.

VAT on abortive costs is often recoverable where the intended use was taxable and the costs relate to your business. The practical requirements are to keep the invoices and to be able to evidence what the entity intended at the time.

This is easier to do contemporaneously than two years later. A short file note recording the intended use of a property you did not buy is worth more than it looks.

Lender and finance costs

Many financial services are exempt from VAT, so there is frequently no VAT on interest or arrangement fees to recover.

Where VAT is charged on a particular fee — some broker fees, for instance — recovery follows your ordinary input tax position, the same test as any other cost.

Do not assume the treatment across a facility is uniform. Read what has actually been charged.

Practical steps

1. Incorporate the buying entity early, so fees can be invoiced to it from the start.
2. Instruct advisers in the correct name, and tell them if the entity changes.
3. Ask for valid VAT invoices, not fee notes.
4. Keep abortive-deal invoices and a note of intended use.
5. Establish your recovery position before committing — if you are not opting and the use is exempt, the VAT on fees is a real cost to budget.
6. Include fee VAT in the completion arithmetic. On a large transaction with significant professional costs it is not a trivial number.

This guide is general information, not tax advice. Recovery depends on your circumstances — confirm the position with your accountant.