This guidance will address those financial and taxation areas of a permanent change in your practice. For the avoidance of any doubt, taking Silk does not constitute a change for tax purposes as you continue your self-employed status as a barrister; this will therefore not be covered in this piece. There are also particular aspects of short career breaks (eg for maternity leave) that are not covered in this article.

The considerations set out below will apply to those barristers changing permanently from self-employed status. It is of course possible for a barrister to act in more than one capacity and have the dual roles of being both employed and self-employed. In those circumstances there is no change in tax status, as self-employment continues, but there is the added complexity of being taxed on different sources of income with different tax rules. These additional considerations are not included in this article and we suggest that professional advice is sought if you are in this position.

Tax position

It is a basic principle of tax that you will be taxed on profits as a barrister over the whole of the life of your profession. The basis of how this is apportioned and taxed in tax years is codified and there are provisions for not only the opening years of your profession but also the closing years.

Overlap relief

If you have chosen to ‘pay as you go’ your tax by choosing a 5 April (or 31 March) period-end date for your accounts, then that is the same as the tax year and the pattern is simple: accounts year = tax year. If however you have chosen to defer your tax liability by having an accounts period-end that is early in the tax year, say 30 April (which we generally recommend), you will pay tax on a proportion of your first year’s accounts more than once, creating an overlap. This element of double counting occurs only in the first year and creates an overlap credit to be offset when you cease your profession at the Bar (or on a change of accounting date*). (*For details of this please refer to Ashley Hayman’s article for Money Matters Summer 2011).

Bunching of terminal profits

The converse of the overlap situation is the ‘bunching’ effect of profits when your practice ceases. The final year’s tax assessment will be based on the profits calculated from the day following the end of the accounting period which ended in the previous tax year. The earlier in the tax year the accounting date falls, the longer will be the period of account relating to the final assessment. Thus a cessation date of, say, 31 December means that the final tax assessment will be based on a period varying in length between 9 months (5 April accounting date) and 20 months (April 30, accounting date). This effect may be lessened to some extent by overlap relief. The tax liability can be predicted as soon as you have a clear end date in sight so that you can budget for the eventual tax liability and possibly take advantage of some tax planning opportunities.

A barrister with an April 30 period end as compared to  April 5 will generally have a larger final tax bill but will have had the cash flow advantage throughout his or her career of paying tax in arrears on what will generally have been a rising income. For this reason it is important when considering ceasing the profession that the tax position is ascertained and provision made as early as possible for the tax liabilities arising. You can’t always choose the date you leave the Bar, but the timing of this can be very important.

Outstanding fees

In preparing the final accounts you will need to consider and include the value of outstanding fees. You should review the value of the aged debts, both billed and unbilled, with particular care and build in a fair value of those debts that you feel are ‘good debts’. You should also accrue a claim for both Chambers expenses and clerk’s fees that will eventually fall due when these debts are received.

It is likely that the amount included will not be the exact amount that you will eventually receive. Any surplus or shortfall will need to be accounted for by you in future tax returns, and this is known as post-cessation receipts. These are declared as miscellaneous income on the tax return and you can claim the related Chambers costs for these if you have not already done so. It is quite possible that these debts are paid to you over a number of years so you may need to remain in the Self Assessment regime until they cease to be received, or are finally written off.

Catch up charge

The catch up charge first arose for accounting periods dating back to 1999 but equally applies now for all barristers who have been in independent practice for seven years. This charge arises when the accounts are first prepared on a true and fair basis (also known as the “earnings basis”) so the initial debtors are not taxed in one go, but can be spread and taxed over ten years. If you leave the Bar within the ten years period of this charge, you can elect to tax the remainder in one year, or continue the annual charge as part of your tax return. Once again, this presents a planning opportunity and should be fully discussed with your advisers.


A barrister is normally accountable for VAT on his or her fees when the fees are actually received. This is known as “cash accounting”. However, if you cease to practise then you must deregister for VAT. Strictly speaking, you should notify HMRC in writing within 30 days of ceasing to practise. VAT form 7 is used for this purpose.

You must normally account for VAT on all your outstanding fees at the time you cease to practise. However, with HMRC’s permission, you may defer paying the VAT on any outstanding fees until the fees are paid. VAT form 811 should be completed and submitted to apply for this concession if you wish to defer the payment of the VAT.

When you do eventually pay the VAT, it must be at the rate in force when you ceased to practise, not the rate in force when you pay HMRC. Guidance around this issue can be found in the HMRC leaflet 700/44.

Other matters

Naturally, there are other matters that also to be considered when you decide to leave the profession.

Your BMIF insurance will need to reviewed and the level of cover adjusted, if not cancelled altogether.

What is the position with regards to Chambers? Are there any termination clauses or notice periods to be considered, Chambers expenses to be met, or perhaps the sale or transfer of any interests in a share in the ownership of the Chambers buildings and assets themselves?


If there was ever a time to plan your finances properly, then this is it. Do involve your financial adviser and accountant as early as possible, so that an action plan can be drawn up incorporating all of the elements involved in this process. This will help to ensure that you avoid any unexpected tax liabilities and take full advantage of any tax planning opportunities that may be available to you.

Andrew Hood, Bar Department Manager, Cassons chartered accountants