More than 80 lawyers attended a protest meeting this week designed to consolidate opposition to a new ruling from the Inland Revenue that could see firms incur hefty one-off tax rises next year.

The tax hit arises from changes in the way revenue is shown in business accounts, and will mean that law firms will have to include the projected profits of equity partners in their work-in-progress (WIP) calculations, rather than once a matter is billed, as at present.

The change was caused by an amendment to the financial reporting standards issued by the Accounting Standards Board.

Simon Mabey, chairman of accountancy firm Smith & Williamson's professional practices group, said: 'Many practices regularly carry three months' worth of unbilled WIP.

So if an organisation has turnover of, say, 6 million, the new rules could mean that they would be taxed on 1.5 million, giving rise to an additional tax liability of 600,000 for 2003/2004.'

More than half of the 175 professionals who attended the meeting in London - organised by the Association of Partnership Practitioners - were solicitors.

Michael Hardwick, a partner at City firm Linklaters and member of the Law Society's tax law committee, who attended the meeting, said: 'We have formed a working party to deal with the issue.

We think the rules should be phased in over a number of years.

'We will be putting in strong representations to the government and meeting with the Inland Revenue in the first instance.'

Mark Baldwin, a tax partner at City firm Macfarlanes, who attended the meeting and is also on the working party, said: 'Most people feel quite strongly that this is a potential tax charge from out of the blue.

Larger firms are concerned because the amount they will be expected to pay will be bigger, but for smaller firms the sum could comparatively be much larger and even unaffordable.'

Mr Mabey said there was a precendent for phasing in the change over several years.

Jeremy Fleming