Bar Council warns of exodus over tax reforms

Government plans to change the way barristers pay tax will force many to quit the Bar and should be abandoned, according to the Bar Council's response to the proposals.

Dawn Primarolo, Financial Secretary to the Treasury, announced on 22 December last year that all professionals would pay tax on an earnings rather than a cash-received basis. For barristers, this means paying tax on money they might not see for years.

The response, drawn up by a special working party headed by Stephen Hockman QC, says the plan is "fundamentally flawed", affecting all barristers but particularly those just starting at the Bar and women whose earnings are interrupted by maternity leave and who could find themselves paying more tax in a year than they receive in fees.

Particular distaste is shown for the "catch-up" charge. Tax on any outstanding bills at the end the current accounting year must be paid by 31 July 2001. As this can involve several year's worth of bills, this "single most crippling proposal" means tax bills potentially "four or five times" larger than usual for the next few years.

Ideally, the Bar Council wants the plans scrapped, but it suggests ways of softening the blow, including:

a delay in the implementation of the proposals to give the Bar more time to prepare for them.

the exemption of barristers earning less than £350,000 from the scheme.

special treatment for barristers doing legal aid and Government-funded work because the Bar's "main (and slowest) paymaster is the Government itself".

The working party is due to meet with Primarolo on 26 February to discuss its proposals.

There is said to be some political sympathy at the Treasury for the Bar's position. But David Milne QC, a working party member is not optimistic. "If the Government is really interested in creating a level playing field between us and traders they should listen to what we say. But I don't know what the hidden agenda is. We suspect the catch-up charge is driven by a desire for a substantial windfall for the Public Sector Borrowing Requirement.

"If all else fails at least they could give us more time to pay the catch-up charge, for example, six years rather than 18 months."