Aged debt at the Bar: when to keep chasing and when to write off a fee

Every practice has them: the fee note from two years ago that never came in, the firm that closed before paying, the direct access client who stopped answering emails after the hearing. Aged debt is uncomfortable to look at, so it often goes unexamined. But leaving it to sit on the books does real damage. It distorts your sense of how well the practice is doing, it can affect your tax position, and it quietly drains time and energy every time you think about it.

This guide explains how to review aged debt properly and how to decide, calmly and commercially, when to keep chasing and when to let a fee go.

What counts as aged debt

There is no fixed definition, but a useful working rule is that any fee unpaid more than ninety days after the fee note is aged and needs active management. Anything over a year old needs a decision. A healthy practice is not one with no aged debt. It is one where every aged fee has an owner, a next step and a date.

Run an aged debt review

Once a quarter, print or export your list of unpaid fees sorted by age and work through it line by line. For each fee ask four questions.

1. Is the fee genuinely owed? Check that the fee note was sent to the right person, that the work and the amount were agreed, and that nothing was paid and not recorded. A surprising amount of aged debt turns out to be a reconciliation error.
2. Why has it not been paid? Administrative oversight, a client who has not funded the solicitor, a dispute about the amount, or a debtor who cannot pay. Each needs a different response.
3. Can the debtor pay? A firm that is trading normally is very different from one that has closed or entered insolvency. A direct access client in financial difficulty may be unable to pay however often you write.
4. What is the realistic next step, and is it worth the cost? A telephone call, a formal letter, a negotiated payment plan, a claim or a write off.

Record the answer and set a date to look again. The act of deciding is half the benefit.

Options before writing off

Escalate within the firm. If the fee earner has not responded, write to the firm's managing partner or head of finance. Solicitors are usually personally liable for counsel's fees under the Standard Contractual Terms, and a polite letter at that level often produces payment.

Offer a payment plan. For direct access clients and smaller firms, a structured plan of monthly payments is often better than nothing, and much better than litigation. Put it in writing and keep it simple.

Negotiate a settlement. Where there is a genuine dispute about the amount, a reasonable discount for prompt payment can be sensible. Weigh the sum you might recover against the time and goodwill you would spend arguing.

Issue a claim. For a solvent debtor who simply will not pay, a County Court money claim can be effective. Send a proper letter before claim first, and consider the effect on the working relationship before issuing against a firm that instructs you.

Claim in an insolvency. If a firm has gone into administration or liquidation, submit a proof of debt to the insolvency practitioner promptly. Recovery may be small, but it is better than nothing, and the proof also supports any write off for tax purposes.

When to write off

Writing off a fee is a commercial judgement, not a failure. It is usually right where:

• the debtor has no realistic means of paying, or no longer exists;
• the cost of recovery, including your own time, is likely to exceed the sum recovered;
• the evidence supporting the fee is weak, for example because the terms were never confirmed in writing;
• pursuing the fee would cause damage to an important relationship that outweighs its value;
• the debt may be approaching the end of the limitation period for a contract claim, which is generally six years, and there is no sensible prospect of a claim.

Once you decide to write off a fee, record the decision, the reasons and the date. Stop chasing, and stop counting it as an asset.

The tax position

How you account for unpaid fees depends on whether you prepare accounts on the cash basis or the accruals basis. Under the cash basis you are generally taxed on fees when they are received, so an unpaid fee has not been taxed. Under the accruals basis, fees may have been included in taxable profit when billed or earned, and a fee that becomes irrecoverable may be deductible as a bad debt. VAT registered barristers may also be able to claim bad debt relief on VAT accounted for on a fee that was never paid, subject to conditions including the age of the debt. These rules are technical, so speak to an accountant who works with barristers before relying on them.

Learn from the list

An aged debt review is also a diagnostic. Look for patterns. If the same firm appears repeatedly, consider tighter terms or payment on account for future instructions. If most aged debt comes from direct access work, take more of your fees in advance. If fees were disputed because terms were vague, improve your client care letters and confirmation emails. The aim is to make next year's list shorter than this year's.

Clear the decks

There is a real psychological benefit in finally dealing with old debt. Fees you have decided to pursue get the attention they need, and fees you have let go stop occupying space in your head. Many barristers find the quarterly review is easier with a clerk who can do the chasing and bring them only the decisions.

Clerk&Counsel offers clerking support to independent barristers, including fee chasing and diary management, alongside introductions to new work.