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13 July 2020
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ACL backs Senior Costs Judge’s ruling on VAT in budgeting work

The Association of Costs Lawyers (ACL) has welcomed the ruling of the Senior Costs Judge that the costs of budgeting and costs management do not include VAT.

The decision is important in ensuring that Costs Lawyers are properly remunerated for the skilled and detailed work that they do.

Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs) was a personal injury claim for an accident at work that settled shortly before trial, with the defendant agreeing to pay the claimant’s costs on the standard basis. At the detailed assessment, one of the issues was that of VAT.

Paragraph 7.2 of Practice Direction 3E provides that, save in exceptional circumstances, the recoverable costs of initially completing Precedent H (the costs budget) shall not exceed the higher of £1,000 or 1% of the total of the incurred and budgeted costs, and all other recoverable costs of the budgeting and costs management process shall not exceed 2%.

The defendant contended that the caps must include VAT because they were not expressly stated to be otherwise.

Senior Master Gordon-Saker disagreed. He said: “To my mind the caps provided by paragraph 7.2 cannot include value added tax because they are expressed as percentages of figures which do not include value added tax.

“All of the figures set out in a budget exclude value added tax – as Precedent H makes clear. 2% of £100,000 excluding value added tax, would be £2,000 excluding value added tax.”

To be otherwise would require “stating expressly”, he said.

The judge took “some support” from the leading textbooks Cook on Costs and particularly Friston on Costs, with the latter noting that Precedent H was “designed in such a way as to discourage VAT being recorded therein, so it would seem odd if the costs were payable on a VAT-inclusive basis”.

Friston adds: “Moreover, if it were not a VAT-exclusive limit, then a VAT-registered litigant would have the advantage over a non-VAT registered litigant – and that would be a curious state of affairs.”

Master Gordon-Saker said that, if this analysis was wrong, then he was “thrown back” to his reasoning in BP v Cardiff & Vale University Local Health Board [2015] EWHC B13.

He said: “My decision in that case was based on the approach taken by the Civil Procedure Rule Committee to the cap on the costs of provisional assessment. Initially rule 47.15(5) provided that the court would not award more than £1,500 in respect of the costs of provisional assessment.

“When disputes arose as to whether that included VAT, the committee clarified its intention that the figure was net by an amendment in the same year as the introduction of the rule.”

ACL chair Claire Green says: “From a common-sense perspective, this is the right decision. It is inconceivable that the sum allowed would vary with any change in VAT. This is a significant decision for Costs Lawyers working both independently and in-house at law firms. The budgeting work our members do is invaluable to their clients and this ruling will ensure that it is properly remunerated.”


For further information, please contact: Kerry Jack, Black Letter Communications

Tel: 020 3567 1208,

Notes to editors:

Association of Costs Lawyers

The Association of Costs Lawyers (ACL) is a membership body representing and promoting the status and interests of Cost Lawyers in England and Wales. Founded in 1977, the Association was granted authorised body status in 2007 and is a front-line regulator, able to authorise its members to undertake the reserved legal activities of litigation and advocacy. In recognition of this new-found status, ACL changed its name from the Association of Law Costs Draftsmen in 2011. Costs Lawyers are regulated by the Costs Lawyer Standards Board.

The term ‘costs draftsman’ denotes an unregulated and unqualified person operating in costs and those who instruct costs draftsmen have no recourse to either the Legal Ombudsman or the Costs Lawyer Standards Board.


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