Law Society slams Labour’s ‘crude’ stealth tax on legal clients
The Law Society issued a blistering response to the government’s proposal to take the interest law firms earn on money sitting in their client accounts, branding it a “fundamentally flawed” sector-specific tax that threatens the stability of the wider UK legal economy.
Last month, the Ministry of Justice opened a consultation on a proposal to introduce an Interest on Lawyers’ Client Account Scheme (ILCA), with Minister of Justice David Lammy describing it as “a way for the legal sector to contribute more to the justice system it relies on”.
The scale of the crisis in the criminal justice system is Lammy’s sole focus. But his other proposal to scrap some jury trials to tackle the backlog has faced widespread condemnation.
Lammy’s proposal is that a proportion of the interest earned on lawyers’ client accounts in England and Wales, including third-party-managed accounts, would be remitted to the government.
The consultation deadline was 9 February. But four days earlier, the government decided to extend it to 9 March.
Law Society president Mark Evans has called for the proposal to be scrapped immediately, citing a lack of financial merit and potential unlawfulness.
“The justice system is a vital public service and the government should fund it sustainably through general taxation, not through the appropriation of client money,” Evans stated.
He added, “It is fair that we all pay for this system through general taxes, in the same way that we all pay for our healthcare system, rather than patients contributing more.”
This comes after the professional services sector narrowly avoided facing a tax hike in the Autumn Budget after it was rumoured that Rachel Reeves wanted to add a layer of tax on limited liability partnerships (LLPs).