Raid on client interest earned by law firms is yet another tax on businesses
The raid on interest earned from client money held in lawyers accounts is yet another tax on UK businesses, say leading audit, tax and business advisory firm, Blick Rothenberg.
Heather Powell, a partner at the firm, said: “The Ministry of Justice (MOJ) needs to be honest that it is businesses who will pay the cost of their planned raid on interest earned on money held in lawyers accounts.”
She added: “When funds are placed with lawyers they are there as they are required to ensure a transaction happens. This may be the purchase of a property, purchase of a company, or a deposit required under a lease – and the business depositing the funds is giving up interest it could earn itself, or the profits that could be earned by using the funds in the business. If the funds are borrowed, then the business will be paying interest on the loan. Taking 50% of the interest on a designated account, or 75-100% of the interest earned if the funds are deposited in a general account, will be a real cost to these businesses as the MoJ proposals will significantly reduce the interest paid to the solicitors client.”
Heather said: “Businesses being able to benefit from interest gained on money held in lawyers accounts reduces their costs, helping to keep the UK economy active, and is integral to supporting businesses growth. The MOJ needs to reflect on the additional costs that will be incurred by businesses in many sectors, and the impact this will have on the ‘Growth’ agenda that the prime minister and chancellor have stated is their top priority.”
She added: “The MOJ’s consultation document states that many clients ‘are unaware that interest is earned on client accounts and often do not expect to receive it.’ This may be true of individuals and families who do not work with solicitors regularly. But businesses who place funds with their lawyers are well aware that interest is earned, and expect to receive it.”