Young Bar exempt from professional tax change

THE INLAND Revenue is to exempt newly-qualified barristers from forthcoming changes to the way lawyers pay tax, after the Bar showered it with objections to the proposals.

In last week's Budget, the Government confirmed it would be pressing ahead with its controversial plan, announced just before Christmas, to tax professionals on their earnings, including work in progress, as opposed to a cash received basis.

However, it deferred the change for a year to April 1999 to give barristers and solicitors time to develop adequate accounting systems.

And, in a significant concession to the Bar, it said new barristers would be able to pay tax on the old cash received basis for the first seven years of practice.

In a further concession, the deeply unpopular catch-up charge tax payable on any bills outstanding in 1999-2000 can now be paid off over 10, rather than three, years.

Each year, lawyers will pay either a 10th of their catch-up charge, or 10 per cent of normal profits, whichever is smaller.

If, in any year, a sole practitioner makes a loss, they pay nothing towards the catch-up charge.

However, after 10 years the catch-up charge must be paid in full, regardless of profitability.

Both the Bar Council and the Law Society have expressed anger that the plans are still going ahead, but they have welcomed the concessions. The Bar Council is particularly pleased over the extra concession it won.

Of over 600 objections received by the Inland Revenue to the plans, 350 came from barristers.

David Milne QC, a member of the special Bar Council committee looking at the reforms, said there was relief around the Bar. “It's solved most of the worst problems.”

He added that the Inland Revenue had promised to collaborate with lawyers on the introduction of the reforms, which could lead to further concessions.

Heather Hallett QC, chairman of the Bar Council, was disappointed that the Government had chosen to go ahead, but was “pleased that they have recognised our concerns, particularly about barristers just starting out”.

Ron Downhill, chair of the Law Society's revenue law committee, said the concessions had saved many high street firms from bankruptcy, although they still faced hardship.