Study loans and pupillage awards

Study loans are sadly not tax deductible and are not seen by HMRC as a business expense.

Scholarships from the Inns are exempt from income tax.

In relation to pupillage awards the Bar Council and HMRC have reached an agreement as to the taxation treatment of pupillage awards. There are two options:

  • Option 1: The pupillage award in respect of the pupil’s first six months will continue to be tax-free, but the award in respect of the second (or subsequent) six months will be included as normal professional earnings in the year of receipt.
  • Option 2: Both the ‘first six’ and ‘second six’ awards will be taxable in the fiscal year of receipt under the general sweep-up provisions (“income not otherwise charged” see Income Tax (Trading and Other Income) Act 2005, Part 5, chapter 8, s687).

The option that you choose is up to you and will depend on a variety of factors such as the level of your award and the date that your accounting year starts. You should discuss this with an accountant if you are in any doubt (see further the Taxation Handbook, below).

There are also National Insurance differences; under Option 1 Class 4 NICs are chargeable, but under Option 2 the award is exempt – see the Taxation Handbook at paragraph 69 (link below).

For more detail on loans and awards generally see paragraphs 61-84 of the Taxation Handbook:

 

https://www.barcouncilethics.co.uk/wp-content/uploads/2017/10/taxation_guidance_-_9th_edition_word_version_with_front_cover.pdf 

Outstanding fees: fee chasing and collection

If your fees are seriously delayed your first port of call is your clerks or fee clerk. They will usually manage the chasing of outstanding fees for you.

Where work is undertaken on contractual terms and solicitors refuse or fail to pay, the only remedy is to initiate court proceedings for recovery of the debt. The Bar Council’s website gives more information. See http://www.barcouncil.org.uk/practice-ethics/professional-practice-and-ethics/contractual-terms/.

If you have a fee outstanding you can make a complaint to the Bar Council if:

  • You have obtained judgment for the fees against the solicitor, or
  • The solicitor has not paid a joint tribunal (see below) or arbitration award in respect of your fees.

In such cases the Bar Council will attempt to recover the fees outstanding on your behalf, and if it fails will register the solicitor on its List of Defaulting Solicitors and other Authorised Persons. See http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/list-of-defaulting-solicitors/.

There are a few remaining disputes relating to payment for work done on non-contractual terms prior to January 2013. The circumstances in which the Bar Council can now assist in these cases are very limited. See generally http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/.

Joint Tribunal

If the problem is not the payment of fees, but the amount due to be paid, you may be able to get help through the Joint Tribunal, a service operated by the Bar Council in conjunction with the Law Society for resolving fee disputes between barristers and solicitors. This can be invoked whether the barrister is working on contractual terms or not. See link here: http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/joint-tribunal-service/.

  • There is no charge to either the barrister or solicitor for using the Joint Tribunal process.
  • Where the Joint Tribunal makes an award it must be settled within 14 days. Any decision of the Joint Tribunal is final and there is no appeal process. Failure to comply with the award will lead to the solicitor concerned being entered on the Bar Council’s List of Defaulting Solicitors (see below) and reported to the SRA, who will endeavour to ensure that the award is honoured.
Accepting instructions from defaulting solicitors

Barristers are not required to refuse instructions from solicitors on the list, but may choose whether or not to accept instructions from them. The BSB Handbook specifically provides that the Cab Rank Rule (rC29) does not apply if the professional client “represents, in your reasonable opinion, an unacceptable credit risk” (rC30.7).

A barrister is always entitled to ask for payment to be made in advance of accepting instructions. If you have done so, and the fees have not been paid, you are under no obligation to take the work (rC30.9.b).

For information to assist barristers and Chambers to ascertain if a firm may be deemed an ‘unacceptable credit risk’, see http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/list-of-defaulting-solicitors/.

How long do you have to wait?

Prior to 2013 the Bar operated under non-contractual default Terms of Work. Barristers did not generally opt to use contractual terms and in those circumstances it was not possible for barristers to sue for their fees. Their only remedy in the event of non-payment was through the Bar Council’s Fees Collection Scheme. See http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/.

Barristers are now advised to establish clear contractual arrangements for their work. Guidance is provided on the Bar Council website at http://www.barcouncil.org.uk/practice-ethics/professional-practice-and-ethics/contractual-terms/.

Whether or not you will be entitled to sue for your fees if payment is delayed and how long you will have to wait before you can do so will vary depending on who is paying you and the contractual arrangements you have arrived at.

Privately paid work and work done for the GLD

 

  • In the case of work done for large insurance companies and for the government via the Government Legal Department civil panel counsel fees are, usually, paid fairly promptly.
  • If you are doing the work on the COMBAR and City of London Law Society terms then clause 9 provides for payment and billing arrangements – see http://www.combar.com/about-us/combar-clls-contract-terms/ and associated links. There are four different bases for payment: Basis A – solicitor should pay within 30 days of receipt of the invoice irrespective of whether the solicitor has been paid by the lay client; Basis B – solicitor is liable to pay the fees, but only when the solicitor has received the fees from the lay client; Bases C and D, the lay client is expected to pay the barrister and the solicitor is not responsible. Anecdotally, those who operate the COMBAR terms mostly use Basis B. Bases C and D differ slightly in that the solicitor is involved in agreeing counsel’s fee with the lay client in the former, but not the latter, but both suffer from the weakness that the solicitor plays no role in the billing of fees and does not chase payment on counsel’s behalf.

In reality even with the contractual provisions you may have to wait several months until you are paid. You should allow for a cash flow that is approximately 2-3 months ‘out’ from when you are billing.

Publicly funded work

The position in relation to publicly funded payments is significantly different.

In Legal Aid cases, because the money is coming from government, most barristers do not use contractual terms. However, the Bar Council has produced a clause that barristers can use in civil Legal Aid cases to give them contractual protection. See http://www.barcouncil.org.uk/practice-ethics/professional-practice-and-ethics/remuneration-guidance/funding-publicly-funded-civil-work/.

Legal Aid fees are paid by the Legal Aid Agency. The fee schemes and payment arrangements are complex and vary between the different fee schemes. The various regulations are in different places on the LAA website, but your clerks will be the first port of call and guidance.

In criminal cases in the Crown Court the average time for payment is around 3-5 weeks from the submission of a claim at the end of a case. The Legal Aid Agency will send an ‘assessed return’ and then payment. However, if there is a lack of records (such as a missing indictment or page count) this can delay payment. For Magistrates’ Court work in crime, regrettably, payment for counsel depends on when the solicitor bills the case, when they receive payment and when they pay your fees. If you are having consistent problems with a firm of solicitors not paying you for Magistrates’ Court cases talk to your fees clerks or contact the Bar Council’s Fees Collection Service (http://www.barcouncil.org.uk/supporting-the-bar/fees-collection/ or email Fees@BarCouncil.org.uk) or ethical enquiries/remuneration enquiry service (http://www.barcouncil.org.uk/supporting-the-bar/ethical-enquiries-service/, email Ethics@BarCouncil.org.uk or telephone 0207 611 1307).

Edna Hackman, Fees Clerk at Landmark Chambers explains the regime for payments in publicly funded civil cases:

Excluding family work, the three main types of Civil Legal Aid are Full Public Funding (also known as Certificated Work), Controlled Legal Representation (CLR) (for representation at mental health tribunals or asylum and immigration cases in the First Tier Tribunal), and Legal Help (advice and help with negotiating but not court work). Each of these types of funding is billed and paid differently, and has a different hourly rate.  It is worth noting that there are sub-divisions for each funding type.  Time frames given below are guidelines only: in reality the various processes involved in claiming fees can be significantly longer.

CLR and Legal Help

Fees for cases funded under CLR or Legal Help are payable by the solicitors and will only be paid once the case has completely finished.  Solicitors submit a bill to the Legal Aid Agency covering their own fees, counsel’s fees and any disbursements.  Payment is commonly received 3 to 6 months after the case is finished.  It is not possible to make a claim for payment on account.

Legal Aid Certificated Cases

When a Legal Aid Certificate in place, payment is made directly to counsel by the Legal Aid Agency.

The date the certificate was issued dictates counsel’s hourly rate. How the fees are reconciled will depend on whether the certificate has been applied for via the LAA’s online Client Costs Management System (CCMS) or on paper.

Enhancements on final claims and payments on account can be requested on fees for work done under certificates granted on or after 02 December 2013.

 

Applications for payments on account are submitted directly to the LAA by Chambers.  Payments will be made of:

 

  • 12 months have elapsed since the certificate was issued;
  • A payment on account has already been made and a further period of 12 months (or 24 months, if there have been 2 payments) has elapsed;
  • The proceedings to which the certificate relates have continued for more than 12 months and it appears unlikely that an order will be made for the costs of the case to be assessed within the next 12 months and delay in the assessment of costs will cause hardship to counsel; or
  • The proceedings to which the certificate relates have concluded or counsel is otherwise entitled to have the costs of the case assessed or paid but has not been paid for at least six months since first becoming entitled.

 

An application under (a) or (b) must be made within the period beginning two months before and ending four months after the event specified in the section.

So, for example, an application can be made:

  • 10 – 16 months after issue of the certificate
  • 22 – 28 months after issue of the certificate
  • 34 – 40 months after issue of the certificate

This means that if you are instructed in a case where the legal aid certificate was issued on 2 January 2012 the window for applying for a payment on account is between 2 November 2012 and 2 May 2013. If the case then goes on it will be for the same period but the following year i.e. between 2 November 2013 and 2 May 2014. Counsel is only entitled to claim one payment on account annually. Payments are often processed within 6 weeks of submitting a claim.

The LAA will pay a maximum of 75% of the amount claimed and will take into consideration what is reasonable, any previous payments on account, the certificate cost limit and sometimes the scope of the certificate.

Further Payments on Account can be applied for but payment is at the discretion of the LAA.

Final Payment

At the end of the case if no order for costs has been granted against the other side the legally aided party is entitled to have costs paid by the LAA.  The final fee note at Legal Aid rates should be sent to the solicitor to be included with their bill.

The LAA assesses bills under £2,500 (exc. VAT). Bills in excess of £2,500 are assessed by the Senior Courts Costs Office (SCCO).

Assessment by the SCCO can take 3-6+ months, and counsel’s fees can be assessed down.  Counsel can appeal the amounts allowed regardless of whether the solicitor is appealing their profit costs and vice versa.  No amount will be paid until all the costs are agreed.

If no appeal is lodged, or when fees are agreed, a certificate will be sent to the court for sealing (6+ weeks) and then the bill submitted to the LAA for payment (6 – 12+ weeks).

If counsel has been overpaid the LAA will recoup any monies owed from counsel; the LAA will not make any payments until there is a credit balance on the LAA system.

Should a costs order be awarded against the other side, the solicitor will submit a bill at inter partes rates to the other side.  It is the solicitor’s responsibility to submit a Claim 2 informing there will be no claim against the LAA fund and that the certificate should be discharged. The LAA will then recoup any payments on account made to counsel and the solicitor.

The Family Legal Aid costs regime is significantly different. 

Family Legal Aid: A Young Practitioner’s Guide

As someone just starting on their feet as a family barrister, you will quickly have to come to terms with one particular issue: legal aid.

Family barristers who practice solely in children work will be predominantly working for local authorities and for legally aided clients, be it children or parents. The one key thing to do in order to ensure that you are paid for legally aided work can be summed up in one word: “Billing”.

Legal aid work is billed using FAS forms (FAS = Family Advocacy Scheme). FAS forms need to be completed by you and signed by the judge or legal adviser after each hearing is completed – you need to ensure that the times are initialed as well as any “ticks”. There are a number of boxes on the forms that can be ticked depending on whether you qualify for those uplifts in each case (for example ticks for the size of the court bundle in pages). There is guidance on the back of the FAS forms as to the tick box criteria and this merits careful reading.

In order to successfully bill a hearing you will need to supply your clerks with the following:

  1. Fully completed, sealed and signed FAS form (do not forget to get the court usher/clerk to seal it using the family court stamp)
  2. A copy of the order listing the hearing with attendance times set out in the directions
  3. If it is a final hearing you will need a sealed copy of the final order (if the hearing is effective)
  4. A copy of your instructions, signed and endorsed
  5. A copy of the legal aid certificate (obtained from your instructing solicitors)

You may find that your billing clerks will obtain documents such as the legal aid certificate but this always merits checking.

If you follow the process set out above, you should be paid reasonably swiftly.

Conditional Fee Agreements

In some cases, you will be asked to work on a Conditional Fee Agreement (CFA) or Damages Based Agreement (DBA). The Bar Council publishes a guidance document explaining the range of different agreements possible. See http://www.barcouncil.org.uk/practice-ethics/professional-practice-and-ethics/remuneration-guidance/funding-privately-funded-civil-litigation/.

While many chambers do not expect pupils to undertake work on a CFA basis, you may be asked to accept particularly Personal Injury work on a CFA basis from early on in tenancy. Although you are entitled to seek an uplift under a CFA out of the client’s damages, anecdotally we have found that most solicitors expect counsel to accept work on a 0% uplift CFA or not at all. Remember that CFAs are an exception to the cab rank rule and you are entitled to refuse a case on a CFA basis for any reason (see BSB Handbook rC30.9.c).

Under a CFA, work will be billed immediately but you do not get paid unless and until the solicitors win or settle the case, so you may wait several years before either receiving or being asked to accept a reduction in fees. It is important to make sure that your clerks (or you) get regular (every six months or so) updates on the progress of the case so that you know when the case is due to come to trial or settle.

Deferred Fees

In addition to the above, you may be asked to agree to take work on a ‘deferred fee’ basis. This work is paid on a private basis (so you get the fees whether the case wins or loses), but you agree not to be paid until either the conclusion of the case or when the solicitor receives costs. This will mean that you may wait several months or even years for the fees (although in reality, you may not wait any longer for fees on a deferred basis than you would have if the solicitor was paying on the issue of fee notes). As with CFAs, it is important to make sure that your clerk keeps in touch with the solicitor to track the progress of the case so that your fees clerk knows when the case has concluded and when to start chasing for your fees.

Terms of payment

Chief Executive Carolyn McCombe observes:

 

“Most clerks regard fees as their preserve and may well be offended if a pupil or junior tenant appears to be critical of the fee.  However, it is obviously important that people understand the rationale of any fees, particularly if they are out of the ordinary.

“The new costs budgeting regime has changed the mind set of all involved. There is now an expectation that barristers will keep within budgets and provide adequate warning and reasons if there is any risk of them being exceeded.”

All sets differ, but you might like to note her set’s approach to the thorny problems of agreeing fees in situations which can cause misunderstandings between clerks and junior tenants.

  • It is good practice for clerks to let a member of chambers know if either a capped or fixed fee has been agreed in relation to any particular piece of work.  Usually, such a fee will only be agreed once the papers have been received and the barrister has given his view as to the length of time the work will take.  Once the fee has been agreed, it should be confirmed to the barrister so that there can be no misunderstandings.
  • If a solicitor asks for an indication of fees prior to sending papers, it is usually best for the clerk to ask the solicitor how long he/she thinks it is likely to take and to base any preliminary estimate on that information.  It should always be made clear that this will need to be confirmed once the papers have been received and reviewed by the barrister.
  • Fees sometimes cannot be based on time spent as there may well be a “price for the job” either because of the source of the work, the value of the claim, or because it is a “loss leader” to secure that case or future work.  It is helpful always to explain the rationale for the fee level if asked. If the reason is a one off, then obviously this should be explained at the outset.
  • If it is proposed to take on a new case which will involve a significant amount of work at a rate below a barrister’s usual hourly rate it is good practice for the clerk to discuss the pros and cons with the member of chambers before committing them to the case.
  • Once a capped or fixed fee has been agreed it will be almost impossible for a higher fee to be charged unless the scope of the work has changed significantly and this is brought to the solicitor’s attention as soon as it becomes apparent.  Solicitors often pass fee estimates on to their clients and will be very reluctant to go back to them to explain why the fee claimed is higher unless there is very good reason.  It can often damage the relationship with the solicitor if estimates are regularly exceeded without an obvious justification

Adrian Vincent, the Bar Council’s Head of Fees and Remuneration adds a note of caution:

“These guidelines will work well in a set where there are good lines of communication between barrister and clerk. I particularly like the fact that Carolyn recommends that the barrister be consulted before fees are finalised where there is anything out of the ordinary in the fee rate proposed. That said, the Bar Council does receive reports from junior barristers in sets which appear not to behave as ethically as they should. Examples are given where members of the junior Bar are exploited, for the benefit of more senior members of chambers. A young junior may, for example, be booked to do a preliminary piece of work for little or no fee, when the case itself will go to someone more senior. Or clerks will fail to chase fees for a junior, for fear that the instructing solicitor will decide to take more lucrative work elsewhere. This can cause hardship. If this should happen to you, you might find it helpful to call the Bar Council’s Ethical Enquiries/Remuneration Enquiry Service (http://www.barcouncil.org.uk/supporting-the-bar/ethical-enquiries-service/, Ethics@BarCouncil.org.uk, tel. 0207 611 1307).

“A protocol for the payment of fees in Magistrates’ Courts was issued by the Bar Council in 2008 http://www.barcouncil.org.uk/media/10196/remmc2.pdf. The BSB Handbook references in it are now out of date (it is no longer the responsibility of the Head of Chambers to ensure fair distribution of work: it is the responsibility of all members of chambers (rC110.3.i). That apart, the guidance remains valid. The protocol is at http://www.barcouncil.org.uk/media/10193/remmc1.pdf

Chambers financial administration: what do or should your clerks do for you?

When you become a tenant or join a new set of chambers it should be made clear to you how your clerks and fee clerks operate. If in doubt, speak to a junior tenant who has been in practice for a year, a former pupil supervisor or another member of Chambers you feel happy approaching.

When a brief fee has been agreed for a piece of work you or your clerk should keep a written record of the date when that agreement was reached and who agreed that fee. Be clear about the terms on which the work has been agreed (see rC22.1 of the BSB Handbook): you may need to refer to them later.

Generally speaking your clerks will bill your work for you. This is dependent on you reporting your hours or the completion of a piece of work to the clerks. Some chambers have a form that you complete; in others it is incumbent on you to tell your clerks (either by email or in person). It is important to keep your clerks up-to-date so that they can bill work on your behalf.

In any event you must keep records supporting the fees that you are charging to comply with rC88 of the BSB Handbook.

If, and when (!), solicitors or other clients do not pay promptly your clerks may chase the payments on your behalf. This is usually the role of a specific fees clerk. They will contact the client at certain intervals to chase up payments.

If you have a problem with cash flow and aged debt your fees clerk will be the person to speak to. You can discuss with them the current situation and they will usually be happy to let you know what is going on – as long as you don’t pester them too much! See also the Outstanding Fees section in the Toolkit.

When money comes in your clerks may pay it into your bank account on your behalf. If you are paid by cheque then it is important to make sure that your clerks have your paying-in book. In other chambers, barristers pay in their own cheques, and it is up to you to make sure that you get to the bank. Sometimes things happen: you may lose a cheque or it may be refused by the bank (sometimes a signature is not recognised). Identify the most accommodating clerk to speak to and they will help you out with this.

Your clerks will also send out receipts to clients as necessary. In some chambers you have to sign a receipt (for example to confirm that you have received the cheque). It is important that you complete any documentation promptly so that it can be returned to the client.

Your clerks (and chambers) should keep a record of the work that has been done and billed and payments received on an electronic diary system. In some chambers you can access this system yourself to get reports on work done, payments received and aged debt. This information may be needed for tax purposes. You should find out what the system is in your chambers.

Income expectations at the Bar

Income at the Bar can vary widely depending on your area of practice, whether you do privately paying or publicly funded work and whether you are employed or self-employed.

In general terms Bar Council and BMIF records for 2014/2015 show the earnings of self-employed barristers to be lower than those for the employed Bar during the first 3 years of practice, but to rise sharply thereafter, to double those of the employed Bar by 7 years’ call. These figures are not, of course, directly comparable, because the self-employed barrister will need to pay chambers’ fees and other expenses, and will not benefit from an employer’s provision of sick pay, paid annual leave, pension, private medical insurance, and so on. Earnings for both employed and self-employed barristers tend to show a steady, and similar, upward progression in the years following.

In money terms, the earnings of both employed and self-employed barristers appear to be around £40,000 by 3-4 years’ call.

Despite the very considerable difficulties facing some members of the junior Bar, in particular those whose main income derives from publicly funded work, the number of barristers continues to rise, and considerably more have experienced an increase or no change in their income in the past year than have experienced a reduction. Three quarters of all barristers showed stable or increased earnings in 2015, over 2014.

An important note to remember is that payments to barristers are invariably delayed, and can be delayed by several months. You may therefore have incredibly impressive ‘work done’ figures which do not automatically translate into payments received. (For aged debt and fee chasing see Outstanding Fees). The figures above have been calculated on the basis of money earned, not payments received.

Financial affairs, accounting and tax for the self-employed Bar

The Bar Council has published a Taxation Handbook entitled ‘Taxation and retirement benefits guidance’. The Handbook, now in its 8th edition, aims to provide “guidance for Barristers and Clerks to support the efficient management of their practices”.

It provides a wealth of detail, with chapters on – amongst other things – income tax, advice to pupils and barristers starting practice, chambers expenses, VAT, self-assessment, and making a will. Access the Handbook here: http://www.barcouncil.org.uk/media/301386/taxation_guidance_8th_edition__for_website_.pdf

This section of the Toolkit touches on some of the key issues we think are relevant to barristers in their early years of practice, based on the experience of YBC members.

The site is being continually updated and added to. If there are things you would like us to cover in future updates, or if you would like to comment on the material that is here, please let us know at YBC@BarCouncil.org.uk.

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