Westminster update: peers debate potential LLP tax rise

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Law Society gives evidence on the UK-India Free Trade Agreement

Law Society head of international Mickaël Laurans described the UK-India Free Trade Agreement (FTA) as a missed opportunity.

Appearing as a witness before the House of Lords International Agreements Committee on Tuesday 11 November, Laurans argued that liberalisation of the Indian legal market would benefit both economies. 

He noted that while domestic reforms in India are promising, the government still needs to prioritise legal services in future trade reviews.

In his oral evidence, Laurans highlighted the growth opportunity legal services provide, both in their own right but also in supporting other sectors.

He said that India is the largest jurisdiction in the world where foreign lawyers and law firms cannot establish. The market has been served on a fly-in-fly-out basis, with 40 of our 50 largest law firms having India desk. Much of the India-related work takes place in London, as well as Dubai and Singapore.

He argued that the FTA was a missed opportunity for the legal sector.

Chair of the Bar Council of England and Wales Barbara Mills KC raised concerns about the fees to participate in India-based arbitrations remaining “too high”.

She argued there was a tension between the aspirational Indian government and protectionist lawyers on the ground.

Peers debate rumoured tax on limited liability partnerships

Peers debated rumoured plans to expand national insurance to LLPs at the upcoming Budget during an oral question on Monday 10 November.

Shadow treasury minister Baroness Neville-Rolfe noted the impact this measure would have on law firms and the professional services sector, which contributes 12% to GDP.

She asked if the government had considered the damage this would do to the economy and whether it could even reduce the tax take.

Peers from across the House raised concerns about the speculated proposal.

Lord Pannick (Crossbench) highlighted the value of legal services to the UK economy, including the £9.5 billion they create in exports.

He argued increasing taxes would damage the ability of law firms to attract cases from abroad.

The Liberal Democrat shadow treasury spokesperson Baroness Kramer raised the impact this measure could have on small and medium-sized enterprises (SMEs) and called for small and medium-sized firms to be excluded from it.

Treasury minister Lord Livermore said the government does not comment on tax speculation and said he would not speculate on tax measures ahead of the Budget on 26 November.

We have firmly opposed the measure, following media speculation that it could be brought in.

We have engaged with the government, ministers, MPs and peers to highlight the negative impact this could have on legal services.

We have also worked with other professional services bodies, including the ICAEW, TheCityUK, BVCA, City of London Law Society and City of London Corporation to send a joint letter to the chancellor opposing the tax measure.

Sentencing Bill has its second reading in the Lords

On  Wednesday 12 November, the House of Lords held its second reading debate on the Sentencing Bill.

The bill, which we broadly support, aims to reform sentencing practices in England and Wales to address reoffending rates and prison overcrowding.

We briefed Lords from across parties ahead of the debate.

Both Lord Beith (Liberal Democrat) and Baroness Jones of Moulsecoomb (Green party) directly referenced the briefing positively – Lord Beith while noting the increased bureaucracy that may arise due to proposed income reduction orders, and Baroness Jones of Moulsecoomb during discussion of imprisonment for public protection (IPP) sentences.

Justice minister Lord Timpson brought the bill on behalf of the government, stating that when they came into power Britain was “days away from running out of places” in prisons, triggering both the bill and a vast prison building programme.

He thanked former MP and lord chancellor David Gauke for his role in chairing the independent sentencing review, which informed many measures in the bill.

Lord Timpson argued the bill would save lives and reduce reoffending by reducing short sentences, arguing that evidence shows around 60% of short-sentence prisoners reoffend within a year.

Lord Chancellor addresses access to justice during justice questions

On Tuesday 11 November, justice questions in the House of Commons focused on reforms to human rights law, probation services, legal aid and prison management.

Significant attention was given to the Probation Service's severe staffing shortages.

Liberal Democrat justice spokesperson Jess Brown-Fuller MP raised that the Sentencing Bill would likely add to existing pressures on probation capacity. 

In response, lord chancellor David Lammy MP restated the government’s pledge to recruit over 1.3K prison officers across 2025/26 and the introduction of AI tools to reduce administrative burdens.

Liberal Democrat shadow attorney general Ben Maguire MP asked about access to legal aid in rural areas, while Ian Lavery MP (Labour) asked about increasing access to justice for people from all social backgrounds.

Justice minister Sarah Sackman KC MP noted annual uplifts of £92m for criminal legal aid and £20m for civil legal aid.

She highlighted that additional reforms include support for law centres and future expansion of civil legal aid through the Public Office (Accountability) Bill.

Luke Murphy MP (Labour) asked what steps the government is taking to help tackle court backlogs.

Sackman noted that the government is investing in a greater number of Crown Court sitting days, putting additional investment in criminal legal aid and had commissioned the independent review of the criminal courts from Sir Brian Leveson.

On the European Convention on Human Rights (ECHR), the lord chancellor noted that the ECHR and other instruments "must evolve to face modern challenges. Domestically, we will clarify how convention rights operate in immigration cases, and I am engaging across Europe on wider reform.”

Sir Brian Leveson gives oral evidence to the Justice Select Committee

Sir Brian Leveson appeared before the Justice Committee for an oral evidence session on the independent review of the criminal courts on Tuesday 11 November.

Regarding the recommendations from part 1 of the review, which was published in July, the session addressed the implication of the proposed Crown Court Bench Division on defendants’ right to a jury trial, and the need to balance both funding and system reform needs.

Sir Leveson noted: “What I have said to the Bar and Law Society and others who say 'well, a bit more money and more sitting days will solve this' – it won’t. […] Just increasing the number of sitting days doesn’t get you over the problem.”

He stressed the need for wholesale reform, encouraged by having seen Crown Court cases scheduled for late 2029 in what he called “a complete denial of justice.”

However, Sir Brian did suggest that “criminal law has become less attractive for legal professionals”, noting that renumeration and funding likely make up part of the solution.

Part 2 of the review on efficiencies in the justice system is yet to be released.

Leveson urged for the government’s response to part 1 as "it impacts" on part 2.

Coming up

We are working closely with MPs and peers to influence a number of bills before Parliament:

• Border Security, Asylum and Immigration Bill begins its third reading in the Lords on 17 November
• Children’s Wellbeing and Schools Bill will begin its report stage in the Lords on a date to be confirmed
• Crime and Policing Bill began its committee stage in the Lords on 10 November
• Employment Rights Bill begins a consideration of Commons message on 17 November
• Mental Health Bill will begin a consideration of Commons amendments on 24 November
• Planning and Infrastructure Bill will begin its consideration of Commons amendments in the Lords on 24 November
• Public Office (Accountability) Bill will begin its committee stage in the Commons on a date to be confirmed
• Terminally Ill Adults (End of Life) Bill began its Committee of the Whole House on 14 November
• Sentencing Bill will begin its committee stage in the Lords on 26 November