Finance

A failure to pay debts – and the increasing willingness of creditors to pursue solicitors for their money – is the most common feature of law firms in financial difficulty, Solicitors Regulation Authority research has found.

City lawyers have ratcheted up their attempt to limit the scope of legislation aimed at tax abuse by LLPs, with strong submissions to the House of Lords and HM Revenue & Customs.

The effects of the planned changes to the taxation of LLPs will be “far harsher than originally expected” and could put a significant strain on finances come April, solicitors have been warned.

Partnerships are “very much the poor relation” in the way they are handled by HM Revenue & Customs and indeed regarded by government”, a major Treasury review has found, with many feeling that HMRC sees them “as if they were exclusively avoidance vehicles”.

Leading volume conveyancer Barnetts has today been broken into four after going into administration. However, no jobs are being lost at the Southport-based firm, whose senior partner, Richard Barnett, described the move as a “fantastic opportunity” for the firm.

Reformed HMRC rules dealing with the taxation of partnerships will obstruct “innocent” firms trying to invest in their businesses and force them to modify their profit-sharing arrangements, according to a leading firm of accountants.

Chancellor George Osborne yesterday confirmed that the government is pushing ahead with plans to “ensure the tax advantages of partnerships aren’t abused” – but the immediate introduction of anti-avoidance rules has been dubbed “shocking”.

Half of partners do not fully understand the potentially “catastrophic” personal consequences of their firm getting into financial difficulty, new research has warned. Baker Tilly said individual partners in firms “can no longer expect that being a good lawyer is good enough”.

The Solicitors Regulation Authority has begun a review of the role of compliance officers for finance and administration, less than a year since they took up their posts. Meanwhile, it has expressed concern about the lack of self-reporting by firms.

The number of small and medium-sized law firms in financial distress has soared to nearly a quarter of the profession, while one in eight has gone out of business in the last year, according to new figures.