29 March 2019

Barristers – How do you handle your accounts when you retire or cease trading?

When a barrister ceases trading, either through retirement, appointment or election to become a judge or a change in vocation or profession, the profits accessible in the final tax year (whether calculated under a Cash Basis or Earnings Basis) of practice will be those arising in the period beginning immediately after the end of the basis period for the preceding year and ending on the date of cessation.

In the latest in our series of articles on barrister accounts, we take a look at the different ways to handle your accounts when you are due to retire or choose stop trading as a barrister for any reason.

Understanding Each Basis

How it works using the Earnings Basis of accounting

On the Earnings Basis method of accounting, the final accounts will include the closing debtors of which would need to be assessed, using a matter of judgement for each individual case, as to the value of the outstanding fees. It is almost certain that the amounts ultimately received will be greater or lesser than that declared and will need to be accounted for in future tax returns.

Where the debtors received are greater than declared in the cessation accounts, the surplus fees received must be declared. If the surplus fees received fall within six years of the trade’s cessation, the accounts can be amended to include them. This election is beneficial when the tax rate in the barrister’s future tax year is higher than the tax rate in the tax year the cessation accounts where filed. If this is not tax beneficial or the surplus fees have been received after six years, they must be declared in the tax year in which they fall, as miscellaneous income.

Where the debtors received are less than declared in the cessation accounts, a claim for the shortfall can be made within seven years of the cessation accounts. The shortfall will be included in the tax year in which the bad debt is declared, this can be used to offset other income received in that tax year. It is possible that the relief for the shortfall will be at a lower rate than the rate it was originally taxed on, depending on the income level of the barrister in the year. If the figure is known by 31 January, twenty-one months after the cessation tax year, it is also possible to make an amendment to the cessation accounts.

If the barrister is to cease practising within their catch-up period, the outstanding catch-up still must be fully paid. The catch-up charge can be accelerated if wanted or can still be spread over the remaining years, if proved to be a more tax efficient method.

A review of your closing debtors at the date of cessation must be completed annually for any shortfall or windfall profits that may arise.

How it works using the ‘New’ Cash Basis of accounting

If you have been preparing your accounts using the ‘New’ Cash Basis, your final accounts you will have to include the value of any Work in Progress at the time of cessation. Fees received after the cessation will be treated as post cessation receipts. Relief against post cessation receipts are allowed for expenses such as clerk fees.

Benefits of using this accounting basis at retirement provide the potential for fees received to be taxed at lower rate tax, depending on the level of other income received in the years following the cessation. This method does require annual review of your aged debtors at the date of cessation and a tax return to be completed until all debtors are either accounted for and taxed or written off as bad debts.

‘Old’ Cash Basis

The ‘Old’ Cash Basis is to be treated similar to the ‘New’ Cash Basis with the exception of fees received after the cessation date are to be treated as miscellaneous income.


Our specialist barrister team has drawn on its 30+ years of experience to create our comprehensive guide to Barrister accounts and Taxation. Download it here.


Approaching retirement or planning to stop trading as a Barrister? 

You need to plan carefully when approaching retirement so make sure you speak to an expert. RWB Director, Nick Bonnello, specialises in barrister accounts and taxation. Contact Nick on 0115 964 8860 or email nickb@rwbca.co.uk to understand how you can become more tax efficient.

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.