The lawyers are plotting to avoid paying supertax in 2010/11...

With the onset of super tax in 2010/11, it has been reported that some of the big law firms are considering changing their year ends from 30 April 2010 back to March 2010. Whilst this measure may lead to some devilishly complex tax computations for partners (Health warning: do not try this at home without software), there is no guarantee that one rule will work for all.

Cash basis and UITF 40
Although firms will have adjusted themselves out of the adjustments which were necessary when the cash basis was abolished by 2010, many may be still adjusting their results as a result of UITF40. The burning issue is will firms now take another view about work-in-progress when the 50% band is on the horizon.

Is there another solution to the super tax problem?
Firms trading via LLPs need to think fast about transferring their trade into companies. There prospect of selling goodwill to a new company is looking very rosy with a CGT rate of a mere 18% (entrepreneur's relief may also apply taking some gains to 10%). If you sell your partnership goodwill, you can loan the proceeds back to the new company too. No tax relief on goodwill acquired from connected parties though.

Supertax at a glance 2010-11 changes to income tax from 2010-11, for individuals:

• a 50% tax rate will apply to taxable income in excess of £150,000.
• The personal allowance will also be tapered to nil for individuals whose income is in excess of £100,000.


Income Slice Tax rate Dividend rate
£1 to £38k* First £38k* 20% 10%
£38,001 to £100k Next £62,600 40% 32.5%
£100,001 to £112,950** Next £12.950 60% 48.75%
£112,951 to £150k Next £37,050 40% 32.5%
£150k Next £1 50% 42.5%

* estimated as 40% band (as yet to be announced for 2010/11)
** personal allowance estimated at £6,475 in example as 2010/11 rates unknown)