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VAT Treatment of Outlay’s
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. 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; 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; 
It should be ensured 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.

VAT Treatment of Intra-EU Supplies
The services of solicitors are deemed to be supplied in the EU country where the customer is established when the service is supplied for business purposes. The invoice should be at the zero rate and the customer will account for the VAT due on the reverse charge basis.

VAT Treatment of Legal Costs Paid Pursuant to an Insurance Policy 
Section 28(3) of the Value Added Tax Consolidation Act 2010 (VATCA 2010) was introduced by section 54 of the Finance Act 1989 and contains a specific provision setting out the treatment of legal costs paid pursuant to an insurance policy. The section provides:
"Where a person is indemnified under a policy of insurance in respect of any amount payable in respect of services of a barrister or solicitor, those services shall be deemed, for the purposes of this Act, to be supplied to, and received by, such person."

Section 28(3) provides that, for VAT purposes, services of a barrister or solicitor supplied in relation to business undertaken for firms of insurers are deemed to be supplied to the holders of policies of insurance where the holders are indemnified under those policies in respect of the costs of such services and the policies have been taken out for business purposes.

The sub-section ensures that the insurance company (which would not have VAT deductibility) does not have to suffer the VAT. 

VAT Treatment of Party and Party Costs
The following is an extract from a practice note on the Law Society website https://www.lawsociety.ie/Solicitors/Practising/Practice-Notes/VAT-treatment-of-party-and-party-costs/#.VsX3U_6yqig 
  • The Revenue Commissioners have commented as follows: “A practising solicitor is remunerated from two sources only, that is, either by his own client under contract or by legal aid under statute. If by agreement or court order one side bears the other side’s costs, the sum involved is a financial transaction between the parties and it is not liable to VAT. The ‘winning’ solicitor will issue, in the normal way, an invoice to his own client for the value of his services and the ‘losing’ solicitor will do likewise in relation to his client. If both clients are registered for VAT and the action concerned a business matter, for example, a disputed trade debt, each client may claim input VAT invoiced to him on his solicitor’s services. The winner’s solicitor will have performed no service whatever for the loser and there can be no question of the loser claiming on his VAT returns for VAT other than that correctly invoiced to him. If the ‘winning’ client is registered for VAT purposes and his solicitor’s services are supplied for business purposes, he will be able to claim the VAT payable to his solicitor and, in this event, there should be no recovery of this VAT from the losing side. It is a matter for the losing or paying party to raise the query whether or not the winner is correctly seeking VAT recovery, and Revenue staff should stand aside from any disputes of this nature.” 
  • “If by agreement or court order one side bears the other side’s costs, the sum involved is a financial transaction between the parties and it is not liable to VAT” that is, the payment by Defendants to the Plaintiff of Plaintiff’s costs is seen by Revenue as a financial transaction, and the Plaintiff will not charge VAT to Defendant on same.
  • It does not mean the services supplied by Plaintiff’s solicitors are not liable to VAT.
  • If Defendant is indemnified by an insurer for Plaintiff’s costs, the position remains as outlined above.
  • Where a person is indemnified under a policy of insurance in respect of any amount payable in respect of services of a solicitor, those services are deemed for the purposes of VAT legislation to be supplied to such person and not the insurer.
  • It might be noted that, in the context of business litigation, if a business has ceased prior to incurring costs that were related to the business and the business was entitled to full VAT recovery, VAT on such costs may be recovered in the normal way, notwithstanding that the business has ceased.