For many devils, when they call in a month or two it will be the first time they have to keep their own tax accounts. If you are employed or a partner in a legal firm, it is likely that all your accounting and tax returns are handled through PAYE or the firm’s accountants. As a sole trader you are required to register as self-employed with HMRC, keep accounting records and file annual self-assessment tax returns.
It is beneficial for advocates to register for VAT even if their annual turnover is below the registration threshold of £82,000. For most advocates in the early years of their practice, registering for the Flat Rate Scheme will ensure that a proportion of VAT can be reclaimed without onerous record keeping. The process of registering for VAT can take a few weeks so it is recommended to apply well in advance of submitting your first invoices. Delays in registering for VAT can leave you in the embarrassing position of having to go back to agents with a revised invoice – or the loss of recoverable VAT.
Advocates are required to operate their practice as a sole trader – at least for the moment. Changes in England now mean that barristers are permitted to set up a limited company, with the accompanying benefit of limited liability and greater flexibility for tax planning. As a sole trader there are still opportunities to organise your affairs to increase your cash after tax, not least by having systems in place to capture all allowable expenditure. Alterledger recommends Xero – online accounting software that enables you to view details of your practice in real time. You can upload receipts directly to the software from your phone and ensure that you never miss an expense again.
A former Dean of the Faculty of Advocates, Lord Clyde is famous for the following quote:
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores.”
Alterledger specialises in tax and accounting for advocates. For more information on maximising your income or to register your interest in a forthcoming seminar for advocates, please contact Tim Alter at firstname.lastname@example.org or visit the website alterledger.com.