I am an established barrister, when do I pay tax on my aged debts?

I am an established barrister; when do I pay tax on my aged debts?

Before 6 April 2013, Barristers in their first seven years of practice did not have to pay tax on their aged debts. After seven years (regardless of turnover) a transition to the ‘earnings’ basis was required. Under the earnings basis, for tax purposes, a proportion of aged debtors are taken in to account.

After 5 April 2013, a simplification of the tax rules saw the introduction of the new cash basis rules. Under these new rules, only income received and expenses actually paid are taken in to account.

Established barristers can elect to use the cash basis rules if their annual income (net of VAT) does not exceed £83,000 (the current VAT threshold). Once you are using the cash basis, you can continue to prepare your accounts in the same way until your annual income exceeds £166,000 (two times the VAT threshold).

If your income dictates that you are not entitled to use the new cash basis rules, then you must either:

1. Continue under the ‘old rules’ and make the transition to the earnings basis after your first seven years, or

2. Immediately prepare your accounts on the earnings basis.

Much will depend on your individual circumstances

You should contact a specialist Bar accountant who will be able to advise you accordingly.

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.