In an article concerning an alleged revolt by junior partners of Dibb Lupton Alsop (The Lawyer, 4 August), it is claimed that the change from the old "previous year" basis of partnership taxation has resulted in a bigger than normal drain on the firm's tax reserves.
First, can we say that any firm in this position is a victim of its own success – firms with level profits will have suffered no acceleration of tax charges, while the new system recognises falling profits sooner.
Rather, we feel that the change to full recognition of the value of debtors and work in progress, will result in cash problems for many firms. The resulting tax charge, albeit spread over up to 10 years, is effectively a charge on income which a firm has not yet received.
Law firms have, we believe, been doubly hit by changes to the tax rules – successful firms by the change to "current year" taxation, and many firms, large and small, will be hit by the "catching-up charge".
Cash flow management has never been more important.
CR Cooper, partner, Cooper Lancaster Brewers Chartered Accountants