Legal sector warns against tax ‘raid’ proposal on client account interest ahead of Budget

London’s legal sector has sounded the alarm over government plans to cut interest on law firms’ client accounts to fund the justice department, warning it could drive some law firms out of business.

The Ministry of Justice’s consultation on a proposal to introduce an Interest on Lawyers’ Client Accounts Scheme (ICLA) closed in March after previous secretary of state for justice, David Lammy, launched it in January.

City of London Law Society (CLLS) chairman, Colin Passmore, told City AM the scheme is “clearly problematic for smaller firms across the country that provide vital services to their clients” and so the group “remains opposed to the proposal”.

“Diverting interest on lawyers’ client accounts is, in effect, another attempt — following the abandoned City levy and last year’s NIC proposals — to impose additional forms of taxation on the solicitors’ profession,” Passmore said.

“None of these measures promote the legal services sector. Instead, they divert time and resources into proposals that will only increase costs for clients, undermine access to justice, and risk driving individuals and businesses towards unregulated providers at a time when confidence in the justice system is already under pressure,” he added.