Solicitors Accounts Revision Notes
Who do the SRA Accounts Rules apply to?
The SRA Accounts Rules apply to authorised bodies: Rule 1.
An authorised body means (a) a body that has been authorised by the SRA to practise as a licensed body or a
recognised body; or (b) a sole practitioner’s practice that has been authorised by the SRA as a recognised sole
So the rules apply when firms receive or deal with money and therefore firms must have systems and controls
in place to ensure compliance with the rules.
Client Money v Office Money
Rule 2.1 SRA Accounts Rules
Client money is money held or received by [the firm]:
(a) Relating to regulated services delivered by you to a client;
Any payment re the regulated services will therefore be client money. If the firm then
doesn’t use e.g. the fee (e.g. client decides not to proceed with purchase so searches
rendered unnecessary) then hold for client.
(b) On behalf of a third party in relation to regulated services delivered by you (such as money held as
agent, stakeholder or held to the sender’s order)
E.g. deposit received from buyer’s solicitor.
(c) As a trustee or as the holder of a specified office or appointment, such as donee of a power of
attorney, Court of Protection deputy or trustee of an occupational pension scheme;
(d) In respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill
for the same
Fees your own charges or profit costs (includes any VAT thereon)
Disbursements any costs or expenses paid or to be paid to a third party not including
e.g. office expense and courier fees [these should be factored into hourly rate]
So e.g. payment made re expert witnesses in court proceedings.
** unpaid disbursements only: i.e. money held or received in relation to a paid
disbursement is not client money** I.e. once a bill has been delivered – then it stops being
EXAMPLES OF CLIENT MONEY:
Money received from client “on account of costs”. Once a solicitor has been instructed, they will usually
ask the client to provide money to cover the likely costs of a matter – e.g. to cover the search fees in a
property transaction. As such fees will yet have been paid for by the solicitor, the money when received is
Money received in respect of unpaid costs or expenses. For example, SDLT, LR fees, court fees which are
expected to be paid but have not yet been paid.
o E.g. money received from the client in respect of a company search fee. The solicitor has incurred
the search fee and the firm has received the invoice, but the invoice has not yet been paid by the
solicitor’s practice. This is an unpaid disbursement.
Mortgage money received from a lender on behalf of the client.
Client damages received by a firm in a personal injury matter.
Money held to pay nursing home fees for a client where a solicitor has been appointed as Court of
Money for the firm’s fees, and any unpaid experts fees, that have been received before a bill has been sent
to the client for those fees.
WHERE SHOULD CLIENT MONEY BE PLACED: CLIENT ACCOUNTS
Client money has to be kept separate from money belonging to the authorised body.
Client money must therefore be held by the firm on behalf of client’s in a separate bank account: the client
Client money must be paid into the client account promptly (rule 2.3) UNLESS one of the exceptions
applies – e.g. client money represents legal aid payments for your costs or you agree in the individual
circumstances an alternative arrangement in writing with the client.
For the purposes of recording accounting transactions, the ledger relating to the client account is referred
to as client cash.
Law firms usually have a general client account in which it holds the money of various clients but can also
open designated client accounts in which to hold each client’s money if it wishes too (probably
o Whether a firm has one or several client accounts, the names of these accounts must include the
name of the law firm and the word client: rule 3.2(b).
o The client account should be held in a bank or building society account in England and Wales: rule
Total amount ‘owed’ by a law firm to all its clients should equal the amount of money held in the clients
Note sometimes money may be received which relate to the client but not to the work that the firm has
done/is doing for the client: e.g. a cheque payable to the client is received from a third party to forward on to
the client. In that case it is good practice to make a note in the client’s ledger recording both the receipt of and
the handing over of the cheque.
ACCOUNTING RECORDS OF CLIENT MONEY
Rule 8 specifies how accounts must be kept: e.g. obtaining bank/building society statements at least every five
weeks and carrying out reconciliations between the statements and the firm’s own records (rule 8.2. and 8.3)
Previous SRA Accounts rules had a defined concept of “office money” which has been removed under new
code. However, each firm will have at least one bank account from which it will run its business – this will be
referred to as the “office account” and the ledger relating to the office account will be referred to as “office
cash”. Can assume that money held in solicitors accounts which does not fall within the definition of client
money above will be office money.
Key rule: client money may not be mixed with office money – they must be kept separate.
EXAMPLES OF OFFICE MONEY:
Money held or received in connection with running the firm;
Monies received after firm has paid for costs/expenses (no bill delivered