Law firms brace as chancellor mulls over new tax on legal sector
Rishi Sunak may be considering imposing a tax levy on the revenues of large commercial law firms, to help to prop up the ailing legal aid system, according to reports.
The chancellor may be contemplating reviving the idea of a bespoke levy on commercial legal practices, an idea first suggested five years ago by then justices secretary Michael Gove, according to The Times.
The proposal, of a 1 per cent levy on the revenues of large law firms, was met coldly by the legal sector then – and is likely to be greeted similarly now too.
The fresh fears have been stoked, according to reports, by the recently published financial statements of three of the so-called magic circle law firms with partners reportedly earning £2m on average.
Freshfields Bruckhaus Deringer revealed it paid its full equity partners £1.9m each on average. Allen & Overy paid the same amount to its equity partners, while Clifford Chance paid £1.85m
The all-equity partnership at Slaughter & May is estimated to dole out an average pay of £2.9m, according to The Times.
Legal professional observer Dominic Carman reportedly said “In the post-Covid world of 2021 and beyond, the Treasury will need to raise revenues wherever it can without harming businesses or ordinary individual taxpayers. If the political will exists to drive through a revenue levy on the top law firms, then it could be done.”