Professional services tax haul set for £14bn slump

A DECLINE in the professional services sector will produce one of the biggest hits to the Treasury’s tax take, analysis for The Mail on Sunday reveals.

The slump in work for lawyers, accountants and consultants will cost the Government £14.4billion, according to the New Economics Foundation.

The sector’s income tax, VAT and corporation tax payments will fall by £9billion, £3.9billion and £1.5billion respectively in the three months to June.

Lawyers have seen a sharp drop in key areas such as home sales. Consultants have also suffered as firms limit spending and put deal-making on ice.

Last week, financial services giant EY told consultants to go on holiday for the final week of May if their work had dried up. EY said it might have to do this again in coming months if the economy does not pick up.

City law firms Freshfields and Linklaters have both suspended lucrative payouts to partners.

The only sectors showing a greater tax hit are retail and manufacturing, set to account for £27billion and £20.6billion in lost tax income respectively.

NEF said the Treasury would lose £97.5billion in tax against figures in the March Budget, assuming three months of lockdown, followed by three months of social distancing.

Alfie Stirling, economics chief at NEF, said: ‘The Government must invest to repair its tax base in key sectors. The question is, how much will come back automatically? If you know that you can intervene to repair the places you need.’