3 factors driving growth in tax law

3 factors driving growth in tax law

At a glance:

  • Tax has performed well throughout 2020. COVID-19 has made both business and personal tax arrangements more complicated, generating plenty of work for tax professionals.
  • The core of tax work will bounce back even more strongly in 2021 as traditional business AT-A-GLANCE activity returns.

COVID-19 brought on a number of tax challenges for businesses and people alike, generating a large load of work for the practice area in 2020 - and this growth has continued on throughout 2021.

The recently released LexisNexis Gross Legal Product (GLP) Index, which uses anonymised and aggregated data from the Bar Council, showcases the practice areas that are growing and declining as a result of the pandemic. 

READ THE LEXISNEXIS GLP INDEX REPORT FOR FREE IN-DEPTH INSIGHTS INTO TAX LAW AND OTHER LEGAL PRACTICE AREAS.

Here are three main drivers of the growth in tax law:

1) The Government's Bailout Scheme

The first two quarters of 2020 brought a huge volume of work for tax teams in law firms – largely managing the tax implications of the Government’s bailout schemes. That work had slowed down in H2 2020. However, we can see that the core of tax work has returned to being reasonably buoyant and healthy.

2) Personal tax arrangements are more complex

There has been significant growth during COVID-19 in the number of individuals paying the additional tax rate (+14%). Major lifestyle changes – working from home, being furloughed – have generally made people’s tax requirements more complicated, increasing the number of people submitting self-assessments and therefore generating more tax.

3) Incorporations and dissolutions

While the impact of COVID-19 and launch of Government support schemes severely suppressed both company formations and closures in early 2020, these had turned a corner by Q4 2020. The decline in the number of public company dissolutions and incorporations has softened considerably, while LLPs have seen more churn – incorporations (+1%) and dissolutions (+15%) both grew in Q4 2020, creating plenty of tax work.

Demand for tax work is likely to continue to be strong in 2021.

There will be a continuing need for businesses to unwind the implications of the COVID-19 support schemes taken up in 2020, as well as the inevitable upsurge in company dissolutions once these support schemes are withdrawn. This will create an enormous amount of tax-related legal activity in 2021 and beyond.

Our advice to tax law firms

This area is one of the fastest growing in the market. Take advantage of the trends and invest to grow. Hire if you need to and ensure your staff have the tools they need – many firms have taken advantage of Government grants and extra cashflow from furlough savings to improve their technology. Investing wisely now should have a revenue multiplier effect in a growing market.

Gain more In-depth analysis by downloading the free LexisNexis GLP Index Report

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About the author:
Dylan is the Content Lead at LexisNexis UK. Prior to writing about law, he covered topics including business, technology, retail, talent management and advertising.