HC Deb 12 February 1998 vol 306 cc539-40
5. Mr. Llwyd

How many representations he has received on the proposed changes in the taxation of lawyers' fees; and if he will make a statement. [27205]

Mr. Gordon Brown

The Inland Revenue press release issued on 22 December invited comments on the proposals to withdraw the cash basis practices available to professional businesses, not just to lawyers. The Inland Revenue has not only received a large number of responses but has had a number of meetings with representative bodies, including the Law Society, the Bar Council and accountancy bodies. The consultation period ends on 14 February. Thereafter, we shall consider the various points made.

Mr. Llwyd

I am obliged to the Chancellor for that response. It seems grossly unfair to expect banisters to pay income tax on fees delivered when typically they will not be paid for several years—many years if they are dealing with Government Departments. Will the Chancellor consider the fact that, if the regressive step that he is considering is adopted, it will be impossible for newcomers to gain entry to the profession? We shall inevitably go back to the old days, when only the well-heeled could enter the legal profession.

Mr. Brown

I understand the hon. Gentleman's comments. Our sensitivity to the needs of young lawyers entering the profession is clear from the responses that we have had and the indications that we have already given that we shall take the issue seriously. We are in a period of consultation about implementation.

The Government pay out £1.7 billion a year in legal fees. Some 80 per cent. of civil legal aid and 90 per cent. of criminal legal aid is paid within the year. The new proposals will allow a period during which they can be implemented with the sensitivity that I am talking about.

Mr. Gibb

Does not the Chancellor's answer show that the proposal was ill thought through? Is that not symptomatic of the Government's taxation policies? We have had an ill-thought-through decision to abolish advance corporation tax on dividend tax credits, leading to the wholesale change of the corporation tax system, an ill-thought-through proposal on quarterly corporation tax payments and an ill-thought-through proposal to abolish PEPs and TESSAs.

Mr. Brown

The proposal is that those in professional bodies should be taxed in the same way as everybody else. The hon. Gentleman should applaud the modernisation of the tax system. He should also congratulate us on reducing corporation tax from 33p to 31p, with a further proposal to reduce it to 30p—the lowest corporation tax rate in the industrialised world.