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Budget changes could mean bigger tax bills for architects

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Architects in partnerships and sole practitioners could have to pay up to 35 per cent more tax per year over the next three years if changes proposed by the Inland Revenue are introduced in the next budget.

The changes will affect those practices accounting on the 'cash basis', where they pay tax purely on the basis of fees received in that year, in contrast to the earnings basis, where the tax is assessed on the basis of all work done.

The ir proposes to abolish the cash basis, and to treat all practices accounting on this basis as if they have wound up their business, so they become liable to a 'catch-up' charge of tax on closing debtors and unbilled work. This could, says Mike Lichten, a partner with accountant Saffery Champness, make affected architects liable to extra tax equivalent to a year's income tax. The ir has said this could be spread over three tax years, starting from 1998/9. It has set a deadline of 14 February for comments. Saffery Champness for one will be protesting. 'In our opinion,' said Lichten, 'it is an iniquity, and it may not be legal.'

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