What is the catch up charge and how does it affect me?

The catch up charge is relevant for Barristers who are required to prepare their accounts on the earnings basis.

Under the earnings basis, you include income as it is earned and expenditure as it is incurred. These accounts must show a “true and fair view” which means that, for most barristers, jobs completed or partially completed must be included as revenue earned regardless of whether they have been billed.

The catch up adjustment is calculated with reference to your aged debtors at the beginning of the period in which you commence to use the earnings basis. Rather than pay tax on all of these aged debtors in one year, the adjustment is taxed (usually evenly) over six or ten years, depending upon what date you first commenced in practice.

Without the catch up adjustment, the first year in which you are required to prepare accounts using the earnings basis would give rise to a significant increase in taxable income. This is primarily because the addition of fees unpaid at the end of the year would fall to be taxed with the fees actually received during that year. 

In the year of transition, it is particularly important to calculate correctly the amounts to include for cases or briefs completed and partially completed; also to make correct adjustments for amounts billed that may not be received in full. We will calculate the catch up adjustment and charge for you. In certain circumstances it may be beneficial accelerate the payment of your catch up adjustment; we can explain if and when this could be of benefit to you.

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.