News in brief: LSC wins overpayment test cases, City lawyers’ bonuses on the up, and more

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By Legal Futures

19 January 2012


Moule: limited supply of talent

LSC wins legal aid overpayments case

The Legal Services Commission (LSC) has won three test cases brought against solicitors to recover legal aid overpayments.

In each case, the solicitor concerned had a legal aid supplier account with the LSC through which the solicitor had received payments on account under legal aid certificates but had not submitted a final bill and claim for costs to the LSC for payment.

In the absence of a final bill and claim for costs, the LSC had assessed the amount due under those certificates as nil and sought to reclaim the amount of the resulting debit balance on the solicitor’s legal aid supplier account from the solicitor.

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Against one solicitor, the LSC also claimed the excess owing to the LSC on a certificate where the costs allowed on the court assessment were less than the amount of the payments on account claimed by the solicitor and in another case, the LSC claimed the amount of the payments on account where the solicitors had received payment of costs from the assisted person’s opponent.

Mr Justice Cranston rejected the argument that the LSC did not have the power to carry out nil assessments and that the LSC’s actions in doing so were unlawful, or had infringed their human rights.

According to Rachel Sleeman of Five Paper, who represented the LSC along with Jeremy Morgan QC of 39 Essex Street, “this is a key decision which will impact on a number of cases brought against solicitors which have been stayed across the country and have been waiting the outcome of these test cases”.

An LSC spokesman said: “We are very pleased that the court has found in our favour, as this is an important principle which affects the legal aid fund. We must always ensure that taxpayers’ money is managed properly, and recovering overpayments or recouping payments on account in these circumstances helps us do that.”

City lawyers enjoy bonus spike

Average bonuses for City solicitors rose 32% to £35,500 in 2011 – but fewer lawyers received one – according to research released today.

A survey of 1,200 private practice and in-house practitioners by recruiter Laurence Simons found that 65% received a bonus last year, compared with 73% in 2010, and more than half were pessimistic about their earnings prospects in the next 12 month

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This was despite the finding that average annual salaries for lawyers rose 4% to £111,500 in 2011 “on the back of some early economic confidence” and pay freezes in 2010. This meant that overall pay packets rose 10%.

The company said this growth was almost twice that of other professions and so the pessimism was hard to understand.

Lucinda Moule, managing director of Laurence Simons, said salaries and bonuses were also pushed up by “the limited supply of talent in their market, making retention the name of the game for employers. A tough 2010 means employers have focused primarily on boosting salaries rather than increasing headcount”.

The survey suggested men were more focused on salary than women when considering a move, but also that “men tend to appraise their earning potential with more confidence”, said Ms Moule. Men wanted a 19% pay rise to move, compared to 13% for women. “There’s no good reason why women shouldn’t follow suit to close the expectations gap,” she said.

Partners seek help with growing tax liabilities

The average tax liability per partner that a law firm is looking to borrow has jumped by 21% to £36,500 this year, according to finance provider Syscap, which said demand for finance in order to meet partners’ first-ever 50p tax payment is surging ahead of the 31 January self-assessment deadline.

Whilst employees have been paying the 50p rate for a year, partners and sole traders will make their first payment this year. Syscap said this payment will be roughly half of their tax bill for all of the last year.

Chief executive Philip White said: “A lot of individual partners are finding the fall in their post-tax income difficult to adjust to – leaving them with little free cash with which to pay their semi-annual tax bill.”

He added that HM Revenue & Customs is less prepared than it was a year ago to allow firms to defer tax payments under its ‘Time to Pay’ scheme. “For example, HMRC will ask businesses, including law firms, to sell ‘non-essential assets’ to pay their tax or to pay the tax using their credit card.”

SRA reaches out to the midlands

The Solicitors Regulation Authority is inviting small firms and sole practitioners in the midlands to a free event on 21 February to find out how the regulator’s new outcomes-focused approach will affect them.

Chaired by Lord Herman Ouseley, it will be at the International Convention Centre in Birmingham,

The event runs from 3pm to 6.30pm and is worth 2.75 CPD hours. Bookings can be made online www.sra.org.uk/ofrdiversity.

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