Why pick on barristers? Well, why not? If the Revenue can identify any group with common characteristics and assemble a specialist team who know what they are looking for, that makes for a very effective series of tax enquiries. There will always be such campaigns. It just happens to be barristers this time. And don’t expect any relief if there is a change of government after the election. There is no evidence that this campaign has any political dimension. It looks very much just like the Revenue doing their job well.

So what are they looking for?

There appear to be three main areas of interest:

  • the change to the earnings basis;
  • work-in-progress; and
  • expenses.


The change to the earnings basis

Barristers used to be taxed on fees received, not on fees earned but not yet received. This was known as the cash basis. In the tax year 1999/2000 the cash basis was replaced by the earnings basis, under which fees are taxable when earned, whether or not billed or received. That’s almost ten years ago, so it may come as a surprise to you that it has become an issue now. There are several reasons. Some barristers have simply overlooked the change. They need to be brought into line.

In 1999/2000, for most barristers the change to the earnings basis suddenly brought into charge to tax a large amount of fees earned but not yet received. It was possible to spread that catch-up charge over ten years. The last of those years is 2008/09. In most cases, the Revenue have until 31 January 2011 to enquire into whether the catch-up charge has been applied correctly. So now is a good time to be checking.

For the first seven years of practice, barristers are still taxed on the cash basis. They then switch to the earnings basis, with a catch-up charge spread over ten years. There are still some barristers who fail to make the switch after seven years, or who do not apply the catch-up charge correctly. It is not difficult to get all this right. The main problem is that non-specialist accountants who do not understand the Bar can just as easily get it wrong.


Suppose you are in the middle of a case at your accounting year-end. Under the cash basis you would have ignored the case (apart from any interim payments). Under the earnings basis your accounts should include everything that you have earned. Still no problem, you may think. If the case is in progress you have not yet earned the fee. And barristers’ accounts have almost never included work-in-progress as such because there is no cost to a barrister’s own time (and other costs are usually immaterial).

But in 2005 a rather difficult accounting concept was introduced, with the jaunty title UITF 40 (Urgent Issues Task Force Abstract 40). The essential principle is given by the abstract as follows: “Where the substance of a contract is that the seller’s contractual obligations are performed gradually over time, revenue should be recognised as contract activity progresses to reflect the seller’s partial performance of its contractual obligations.” (If you are now wondering “Why?” that’s a harder question to answer. UITF 40 has actually cost most accountants extra tax!)

What does UITF 40 mean? It means, for example, that if you are half way through a case then your accounts should include half the fee that you expect to earn. There has been a widespread misconception that UITF 40 does not apply to barristers. Well, it may be irrelevant in your individual circumstances. Or any adjustment may be too small to matter. But if you have not even considered the question or not kept any record to show that you have (or if your non-specialist accountant has failed to do so), then you may have a problem.


Expenses have featured in previous tax enquiries into barristers. Part of the problem is that barristers can often be a little careless in their record-keeping. There is usually no problem with fees, or with clerks’ fees and chambers expenses. These are generally well recorded by chambers. It is individual expenses that are the problem. For example, you may have made many trips by taxi, but if you didn’t keep any record, or a single receipt, and just included an estimated figure, then you may have great difficulty persuading the Revenue that the amount claimed is justified.

Chambers expenses have also featured in previous enquiries. Where chambers have built up cash reserves, or have incurred capital expenditure, or have provided entertaining to solicitors, then adjustments are required for tax purposes. In some cases, chambers’ accountants have dealt with these adjustments correctly, but individual barristers have failed to pass on the information to their own accountants. The practice is now widespread whereby chambers are taxed as an unincorporated association and all required adjustments are dealt with by subjecting chambers to corporation tax. In those cases, chambers expenses are always fully allowable for individual barristers. But there are still some chambers where these issues are just not addressed.

Other areas of interest may include: use of home as an office; travel from home to chambers; and remuneration paid to spouses and partners. But it seems that these are not the focus of the present campaign.

What else?

The Revenue may start with a particular objective, but they will take whatever they find. Here is a miscellany that you may like to think about.

  • Fees from secondary chambers. Accountants generally get the information directly from chambers. But it can be easy to overlook a secondary source of fees.
  • Other professional income. If you earn professional income outside chambers, for example from lecturing, or from writing or editing books, you must tell your accountant. Even the best accountants are not psychic!
  • Chambers rent. If you own a share in chambers property and receive a share of the rent, that rent is taxable. You can deduct interest on any loan taken out to buy your share in the property. But do not simply overlook the rent.
  • Share options from a previous employment. We saw a case recently where substantial gains on the exercise of share options had been completely ignored.
  • Rent from investment property or from letting a holiday home. Often the figures are negative after deducting interest. But do not simply overlook the whole item.



Only you know whether there is something to worry about. But why not have a conversation with your accountant? If you are asked the right questions and you are able to give the right answers, it may put your mind at rest. And if there is a problem you need good professional advice to put it right with the least possible cost.

Ashley Hayman is Senior Partner of Cassons Chartered Accountants who specialise in the accounts and finances of barristers. Visit: www.cassonsforcounsel.co.uk