Finance

HM Revenue & Customs is expecting a rush of solicitors owning up to income they have not declared as next Monday’s deadline for the ‘Solicitors Tax Campaign’ draws near.

There are increasing reports of law firms allowing their client account to be used by others as a bank account in clear breach of the rules, the Solicitors Regulation Authority (SRA) warned yesterday.

HM Revenue & Customs (HMRC) has opened up a three-month window for solicitors to own up to income they have not declared, or face tougher penalties if they are caught dodging tax.

The tax benefits for law firms of incorporating have been reduced thanks to surprise changes announced by the Chancellor in this week’s Autumn Statement. Law firms have been incorporating in large numbers, with tax advantages in both the initial transition and the ongoing practice.

Four law firms have recently lost £2m from their client accounts after falling victim to scammers who tricked them into disclosing bank security information over the telephone, the Solicitors Regulation Authority has warned.

“Overwhelming disagreement” made the Solicitors Regulation Authority abandon a plan to make compliance officers sign declarations that their firms followed the accounts rules, it has emerged. But further changes to accountant’s reports are coming.

The turnover of SME law firms in London and South East rose by 4% this year, according to an annual benchmarking survey by accountants HW Fisher & Co. However, the survey warned that rising overheads would continue to put pressure on profits.

A tribunal judge has described as “beyond comprehension” the failure of a financially struggling law firm to make special arrangements with HMRC under the ‘time to pay’ scheme.

Average profit per equity partner (PEP) for the top 10 law firms has exceeded £1m for first time since 2008, reaching £1.03m, while they also recorded a record average profit margin of 40%, PwC has reported.

Yorkshire’s largest conveyancing firm has set up a £150,000 training academy after its workload trebled in the past two years. It comes as the Law Society has predicted increased turnover growth in the legal sector this year and next, in part because of the recovering property market.

Smaller law firms are struggling to retain their junior partners in advance of tough new capital requirements set out by HM Revenue & Customs in its crackdown on fixed-share partners avoiding PAYE tax, an executive search firm has claimed.

The Law Society is set to reduce the cost of practising by around 20%, even though its budget is going up in 2014/15. The net funding requirement for the next financial year is £116.7m, a 3.7% increase on this year’s budget.

Law firms with 11 to 25 partners are leading the way out of recession, with rising fee incomes, net profits and a 21% surge in profit per equity partner (PEP), research has found.

The Solicitors Regulation Authority has unveiled plans to remove the requirement that firms have their client accounts reviewed by an independent accountant and submit an annual accountant’s report.

A leading personal injury law firm has gone public with a unique profitability calculator to make other practices realise how radically the economics of work have changed in the post-LASPO era, Legal Futures can reveal.