Income Tax for Barristers

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INCOME TAX RETURNS FOR
BARRISTERS

Barristers’ accounts and the taxation are often complex as there are numerous variables that relate solely to the profession which require careful thought and long term planning.

Complications such as which debtors are taxable, especially on Conditional Fee Arrangement cases, how to proportionate expenses, and how to differentiate the treatment of court clothing for VAT and income tax purposes, can often cause confusion and complexity.

Permitted expenses within tax legislation are stipulated as 'All expenses incurred wholly and exclusively for the purpose of trade'.

For barristers this means:

  • Court clothing: Wig and gown, detachable court collars and laundry of such items in business.  HMRC will permit VAT to be recovered on dark suits as required to be worn in court – See www.gov.uk – ref. VIT 43800.
  • Motoring costs: must be apportioned between personal and private use, in the perfect scenario, a log being kept covering the mileage for business use.  Note that travelling from home to the Chambers or vice-versa would be classified as a private expense.  No VAT on the acquisition of a car can be claimed, but 50% of the VAT can be reclaimed on car leasing.
  • Phones: with most contracts having free texts/minutes it can be difficult to apportion business vs private, and so we make a pragmatic judgement between splitting that contract between private and business.
  • Capital equipment: business items such as laptops, tablets, printers, and office furniture, are given tax relief through the capital allowance scheme.
  • Subsistence: if it is required that work be conducted away from home then accommodation and meals become allowable costs.
  • Home office: if working from home there is a claim that can be made, however if you work exclusively from home then it is possible to claim a larger allowance.
  • Bank interest: if the bank account is an exclusive business account, and the interest incurred is as a result of solely business transactions, then the expense is allowable.
VAT Schemes for Barristers

When your income exceeds £85,000 within a 12-month window, you will need to register for VAT, whether as a sole trader or a private limited company.

There are various schemes that can be subscribed to when registering for VAT. The traditional way of calculating VAT liability a business pays or claims back from HM Revenue and Customs (HMRC) is usually the difference between the VAT charged by the business to customers and the VAT the business pays on their own purchases.

With the Flat Rate Scheme you pay 14.5% to HMRC and keep the difference between what you charge your clients and pay to HMRC.  However, you cannot reclaim VAT on your purchases, except for certain capital assets over £2,000.

To join the scheme your turnover must be £150,000 or less and was popular for barristers for its simplicity but is probably no longer financially efficient.  At Taxfile we can help you decide which would be most financially efficient for you but we also understand that each Chamber is organized differently for VAT and understanding their methodology, we can  calculate and submit your VAT figures through our making tax digital (MTD) compliant software.

Our Tax Services for the Legal Services

  • Tax exemptions for the legal practices
  • Deducing taxes applicable on barrister income
  • Income Tax preparation & filing for barristers
  • Calculating permitted barrister expenses
  • Bookkeeping for Barristers
  • VAT advice for barristers
  • VAT calculation and submission via MTD compliant software
Covering the South London area we are your professional personal tax accountants near you, and can help with your tax preparation and calculations.
Call us on 020 8761 8000 to see if we can be of any assistance.