With the deal market not exactly motoring and law firms trying to cut costs, the timing of news that they will no longer be able to claim back tax relief on fees they are shelling out to recruiters for lateral partner hires is unfortunate.

Recruiters are regularly charging around 25%-35% of annual salary for top name partner moves so, given average partner profits at the magic circle stood at more than £1.3m for the last financial year, we are not talking about insignificant amounts.

With that in mind it is understandable that the prospect of losing the ability to offset those recruitment costs against tax due to a tougher implementation stance from tax authorities is not going down well. After all, in theory a firm that was making heavy partner recruitment could pay several hundred thousand pounds more in tax a year.

Certainly, US law firms hoping to bolster their City offering or upwardly-mobile UK practices are going to have to look that little harder at potential recruits. Olswang and DLA Piper, for example, have brought in a stream of lateral partner recruits in recent months, sealing many of the deals via recruiters.

Little wonder then that despite general reluctance to talk publicly on the subject, partnership specialists and accountants confirm that the majority of the top 50 and many US firms are currently having discussions with HM Revenue & Customs (HMRC) to try to rectify things.

Whether there is an active debate is a matter of, well, debate, with some feeling that HMRC will look at the issues on a case-by-case basis to allow for some flexibility, while others feel that firms looking for understanding from the taxman have little hope.

For larger firms, the tax bill is unlikely to mean a straight line between making the hire or not making the hire. After all, if a partner brings with him a multimillion-pound book of business, then the loss of a tax offset on a £300,000 recruiter fee is hardly likely to be a deal-breaker. Would Weil Gotshal & Manges or Freshfields Bruckhaus Deringer really be likely to reject outright significant team moves like that of Marco Compagnoni or Maurice Allen and Mike Goetz on that basis?

But for smaller firms it could well be more of an issue. And even those whose purses are currently bulging are unlikely to want to spend more than they have to.

Which presumably leaves recruiters in an interesting position. If firms do not manage to win round HMRC and persuade them to count recruitment fees for equity partners as an allowable expense (and according to the HMRC, they are not likely to) they may attempt to try to pass some of the cost back to the recruiters.

As one headhunter says: "It is another cost to a business at a time when costs are under scrutiny – it might well make people look at their suppliers and question if they really need either the hire or the size of fees."