Magic Circle law firms face £250m blow from Reeves tax raid

Core Viewpoint - The proposed implementation of a new 15% tax on profits made by Limited Liability Partnerships (LLPs) is criticized by law firms as being short-sighted and potentially damaging to the legal profession and the UK's status as a global legal hub [1][5]. Tax Impact - The new tax would increase the tax bill for partners at top corporate law firms in London from £1.78 billion to £2.04 billion, representing an increase of £260 million [2]. - The four largest firms in the "Magic Circle" (Clifford Chance, Freshfields, Linklaters, and A&O Shearman) would collectively pay an additional £262 million on their £3.8 billion in profits for the year [3]. Industry Response - The legal profession has expressed strong opposition to the tax plans, warning that they could lead to job relocations abroad and hinder growth [5]. - Colin Passmore, chairman of the City of London Law Society, emphasized the need for constructive consultation with the legal sector before implementing such tax changes, highlighting the sector's significant contribution to the UK economy [6]. - David McNeill from The Law Society noted that imposing a new tax could severely impact the legal profession, which is seen as vital to the government's growth strategy [7]. Global Competitiveness - The potential tax changes could incentivize law firms to transfer work and talent to countries with more favorable tax systems, resulting in a loss of revenue for the UK Exchequer [8].