Many high street professional practices, including law firms, are facing a one-off 100% hike in their tax bills and could go out of business unless they are given more time to pay, it was claimed this week.

A survey by the Consultative Committee of Accountancy Bodies (CCAB) - which represents the six major accounting bodies in the UK - found that almost one in five professional firms (17%) faces a tax bill that is more than double their normal bill as a result of new accounting rules. The study, which included research carried out by the Law Society, revealed that a further one in four firms (25%) faces a bill that is more than 50% higher than normal.


The hit stems from the introduction of UITF Abstract 40, an accounting statement that has accelerated the way service providers such as law firms and accountants account for revenue and work in progress (see [2005] Gazette, 17 March, 1). If no relief is offered, some firms will have to pay the increased tax bill on 31 January 2006.


In a joint letter to the Paymaster-General, Dawn Primarolo MP, the Law Society and the CCAB said: 'We are concerned that typical high street businesses will not be able to fund this additional charge from the bank, thus threatening their viability.'


The two bodies called for firms to be given relief allowing them to spread the extra payment over a ten-year period - a move resisted in earlier negotiations by Ms Primarolo, who is understood to favour a much shorter time-frame.


However, the CCAB and the Society warned that 'many businesses will struggle with a ten-year spreading and that anything less may result in businesses folding.'


The survey also found that small firms with ten or fewer partners will be proportionally harder hit than larger firms, although it added that some of the latter's reported adjustments 'are still substantial in size'. The CCAB and the Society argued that any spreading relief should therefore be made available to firms of all sizes.


Mike Hardwick, chairman of the Law Society's tax law committee and a partner at City firm Linklaters, said: 'We are still in discussions with the government and we hope that they will consider a spreading relief to help those members of the profession prejudiced by the accounting change.'


A Treasury spokeswoman said the Paymaster-General would consider the request for relief and respond in due course.