Solicitors' Accounts

A law firm has received a letter from one of its clients questioning why it charged VAT on its profit costs in a bill that the client received. A junior solicitor is unsure of the firm's reasoning behind this and has asked a senior partner for some advice. The senior partner saw this as an opportunity to teach the junior solicitor some of the details of VAT. The partner is preparing an explanation and wants to make sure that all the details are correct.

Which of the following statements is incorrect and should be excluded from the explanation?

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