Solicitors Accounts
Where is charges for professional services recorded? - ANSWER As CR on income account -
client's debt is recorded as a DR entry on an account in the name of the client
Where is interest recorded on a ledger if the bank pays it into the separate designated account? -
ANSWER Recorded as a CR on the clients new ledger and DR on deposit cash account
Which account does a firm pay legal aid payments into? - ANSWER Into the firm business account
Which bank account pays the disbursement on a principal method? - ANSWER Business, even if
there is client money available
Who holds the money in a Third Party Managed Account? - ANSWER The TPMA Provider
(therefore it is NOT client money)
A firm may open a joint account with a client or 3rd party. Would this be client money? -
ANSWER YES it is client money but it is NOT a client account - it is in the name of soliciotr/firm
and client/3rd party
Are services which are necessary for the supply of legal services, classed as a disbursement? -
ANSWER NO
Are traveling expenses incurred by a solicitor classed as disbursements? - ANSWER NO (solicitor
must pay for them)
Before a firm pays any costs from the client bank account, what should they do? -
ANSWER Must give a bill of costs or written notification to the client BEFORE you transfer the
money. And any payment must be for a specific sum.
Can a client bank account be used as a banking facility? - ANSWER NO = serious breach of rules
under SRA
Can a firm may a payment for disbursements without issuing a bill or written notification? -
ANSWER Yes - the firm must make it clear to the client that the money may be used to reimburse
the firm for payments made, it will then be permitted without issuing a bill
Can a firm write off client debt? - ANSWER Yes if they realise the client is not going to pay.
CR client ledger account - business section
DR bad debts account
Can a person choose to register as a taxable person? - ANSWER Yes if they want to recover input
tax charged to them
Can the SRA obtain an accountant's reports? - ANSWER Yes on reasonable notice
Can withdrawals from a client bank account be made if there is not sufficient funds? - ANSWER
No - Rule 5.3 says there must be sufficient funds
Can you hold client money to pay the client's routine outgoings? - ANSWER No = breach of rule
3.3
, Solicitors Accounts
Do firms always have to obtain an accountants report? - ANSWER Not if all the client money is
received from Legal Aid or the total balance of the firms client accounts does not exceed £10,000
and a maximum of £250,000 in foreign currency
Do firms like to train insurance commission? - ANSWER No it is rare
Does a firm have to keep a central record of bills? - ANSWER Yes + other written notifications of
costs to be readily accessible
Does a firm need permission to use a TPMA? - ANSWER No but they should notify the SRA they
are using it
Does client money include money received for disbursements which have already been paid? -
ANSWER No - where money is received for reimbursements of such payment, it is a receipt of
business money
Does HMRC regard disbursements as part of legal services? - ANSWER NO = firm does not have to
charge VAT on them
Does the firm need to prepare bank reconciling statement for the client bank accounts? - ANSWER
Yes rule 8.3 = cash book should be up to date
Does the SRA accept billing for anticipated fees and disbursements? - ANSWER Yes but they
highlight risks such as the client terminating the retainer
For VAT purposes, what did the House of Lords statement can only amount to qualify as a
disbursement? - ANSWER When the expense is supplied by a 3rd party and you merely act as a
representative for your client
Give an example of an exempt supply - ANSWER Land (except new commercial sales)
Insurance some postal services finance health services burial and cremation
How are disbursements charged to the client if an agent is being used? - ANSWER They are
charged to the client as usual + it adds the agent's professional charges to its own charges
How are non-disbursements recorded on a client ledger? - ANSWER They are DEBITED to client
ledger when they are paid and CR Cash Account - business section with the VAT entered separately
How are professional fees recorded if an agent is being used? - ANSWER As an expense of the
instructing firm
How do you record an inter-client transfer? - ANSWER No entries on cash account as no money is
moving.
But a DR entry in client section on ledger account of who the money was originally for and a CR entry
in client section of ledger for whom money is moving.
DR client ledger for 1st client and CR ledger for 2nd client.
How is an agency firm treated in the ledgers? - ANSWER There is a client ledger account in the
name of the instructing firm and normal entries are made
Where is charges for professional services recorded? - ANSWER As CR on income account -
client's debt is recorded as a DR entry on an account in the name of the client
Where is interest recorded on a ledger if the bank pays it into the separate designated account? -
ANSWER Recorded as a CR on the clients new ledger and DR on deposit cash account
Which account does a firm pay legal aid payments into? - ANSWER Into the firm business account
Which bank account pays the disbursement on a principal method? - ANSWER Business, even if
there is client money available
Who holds the money in a Third Party Managed Account? - ANSWER The TPMA Provider
(therefore it is NOT client money)
A firm may open a joint account with a client or 3rd party. Would this be client money? -
ANSWER YES it is client money but it is NOT a client account - it is in the name of soliciotr/firm
and client/3rd party
Are services which are necessary for the supply of legal services, classed as a disbursement? -
ANSWER NO
Are traveling expenses incurred by a solicitor classed as disbursements? - ANSWER NO (solicitor
must pay for them)
Before a firm pays any costs from the client bank account, what should they do? -
ANSWER Must give a bill of costs or written notification to the client BEFORE you transfer the
money. And any payment must be for a specific sum.
Can a client bank account be used as a banking facility? - ANSWER NO = serious breach of rules
under SRA
Can a firm may a payment for disbursements without issuing a bill or written notification? -
ANSWER Yes - the firm must make it clear to the client that the money may be used to reimburse
the firm for payments made, it will then be permitted without issuing a bill
Can a firm write off client debt? - ANSWER Yes if they realise the client is not going to pay.
CR client ledger account - business section
DR bad debts account
Can a person choose to register as a taxable person? - ANSWER Yes if they want to recover input
tax charged to them
Can the SRA obtain an accountant's reports? - ANSWER Yes on reasonable notice
Can withdrawals from a client bank account be made if there is not sufficient funds? - ANSWER
No - Rule 5.3 says there must be sufficient funds
Can you hold client money to pay the client's routine outgoings? - ANSWER No = breach of rule
3.3
, Solicitors Accounts
Do firms always have to obtain an accountants report? - ANSWER Not if all the client money is
received from Legal Aid or the total balance of the firms client accounts does not exceed £10,000
and a maximum of £250,000 in foreign currency
Do firms like to train insurance commission? - ANSWER No it is rare
Does a firm have to keep a central record of bills? - ANSWER Yes + other written notifications of
costs to be readily accessible
Does a firm need permission to use a TPMA? - ANSWER No but they should notify the SRA they
are using it
Does client money include money received for disbursements which have already been paid? -
ANSWER No - where money is received for reimbursements of such payment, it is a receipt of
business money
Does HMRC regard disbursements as part of legal services? - ANSWER NO = firm does not have to
charge VAT on them
Does the firm need to prepare bank reconciling statement for the client bank accounts? - ANSWER
Yes rule 8.3 = cash book should be up to date
Does the SRA accept billing for anticipated fees and disbursements? - ANSWER Yes but they
highlight risks such as the client terminating the retainer
For VAT purposes, what did the House of Lords statement can only amount to qualify as a
disbursement? - ANSWER When the expense is supplied by a 3rd party and you merely act as a
representative for your client
Give an example of an exempt supply - ANSWER Land (except new commercial sales)
Insurance some postal services finance health services burial and cremation
How are disbursements charged to the client if an agent is being used? - ANSWER They are
charged to the client as usual + it adds the agent's professional charges to its own charges
How are non-disbursements recorded on a client ledger? - ANSWER They are DEBITED to client
ledger when they are paid and CR Cash Account - business section with the VAT entered separately
How are professional fees recorded if an agent is being used? - ANSWER As an expense of the
instructing firm
How do you record an inter-client transfer? - ANSWER No entries on cash account as no money is
moving.
But a DR entry in client section on ledger account of who the money was originally for and a CR entry
in client section of ledger for whom money is moving.
DR client ledger for 1st client and CR ledger for 2nd client.
How is an agency firm treated in the ledgers? - ANSWER There is a client ledger account in the
name of the instructing firm and normal entries are made
