It’s been a tough few months for some solicitors.
It started with the crackdown from April on Limited Liability Partnerships which introduced tough new rules meaning some LLP members have to be taxed as employees and removed the tax benefits available from having complex structures involving companies and LLPs.
More recently, George Osborne’s Autumn Statement included measures to significantly reduce the tax benefits of incorporation. The measures, which remove the benefit of the 10% tax rate from Entrepreneurs’ Relief on the sale of goodwill to a company controlled by the former partners, are likely to have an impact on any professional practices considering incorporation.
Incorporation has been an increasingly attractive route for solicitors and many firms will now need to pause and rethink their strategy. In some cases, it is still the best option for both tax and commercial reasons. Others, however, now need to go back to the drawing board.
Following this, HMRC have now launched their Solicitors’ Tax Campaign, the latest in a series of targeted campaigns to tackle tax avoidance with a time-limited disclosure opportunity. The campaign is focused on the legal profession and will see HMRC actively targeting lawyers in an attempt to find undisclosed income and underpaid tax.
Any members of the legal profession who are aware or concerned that their previous tax returns have been less than complete should take advice immediately with a view to using this opportunity to disclose and pay tax now with low penalties, rather than risk facing much tougher penalties later on if HMRC discover the omissions.
Whilst this will not affect most firms who have paid the right amount of tax, anyone who suspects they may have some income to disclose or additional tax to pay should seek advice now.
For more information, please contact Jane Parry at email@example.com or call 01254 679131 to speak to our tax team.