Solicitor’s Accounts
The key rules to focus on
Rule 2.1 – Definition of client money
Rule 2.3 – Receiving client money –
Distinguish client money from firm’s own money (and money not regulated
by SRA) Weston v The Law Society (1998)- there is a duty of stewardship
in relation to client money
Rule 4.2 – Mixed receipts
Rule 4.3 – Transfers of client money for costs
Rule 5 – withdrawals of client money
Rule 7 – Interest
Rule 8.1 – Ledgers and entries
Rule 11- third party managed accounts: money is not held by the solicitor or
the firm but by a third party page 103
Code of conduct principles
Principle 1- upholds the constitutional principle of the rule of law and
administration of justice
Principle 2- upholds trust and public confidence in the profession
Principle 3- independence
Principle 4- honesty
Principle 5- integrity
Principle 6- encourage equality, diversity and inclusion
Principle 7- acting in the best interests of each client
, Client ledger
When carrying on the balance following a finished ledger sheet, you
need to make sure you remember to put the client name and matter at
the top again.
Entry description on client ledger: Balance
Remember to use the date from the bottom of the last page.
Paying a disbursement:
If you are passing official copies on without comment, this IS a disbursement
and not taxed
If it is not a disbursement = TAXABLE SUPPLY- DR entry on business side
which is then added to the next VAT entry
Taxable supply example:
Page 132- shows ledger for taxable supply
Client: Bartok
Issue: purchase
Date Details Business account Client account
DR CR BAL DR CR BAL
May
1 Mining search 10 10DR
(taxable supply)
2
Local land charges 10 20DR
search(TREATED
AS
30 DISBURSEMENT) 300 320DR
Profit costs 382DR
VAT on £310 62
Passing on the VAT:
AGENCY-
Invoice is addressed to the client it is treated as made to the client
Firm acts as the agent passing on the money to the client
Send the suppliers tax invoice to the client
When paid using the agency method- pay from client account if sufficient
funds or business if not sufficient funds
SEND THEM THIS INVOICE
PRINCIPAL-
Invoice addressed to the firm- treated as made to the firm
, HAS TO BE PAID FROM BUSINESS ACCOUNT
When you deliver your bill of professional charges- thus you send an invoice
to him for your charges of the VAT
Bill client for profit costs and the disbursements and the VAT on those
Passing on the VAT- supply treated as made to the firm (P method)
Firm can treat this supply as input, use business money to pay the invoice
and tax
Firm them resupplies the item to the client for the same price- charging the
client the output tax (firm professional charges and disbursements)
Distinction between agency method and principal method of paying vat
Principal: when the invoice is addressed to the firm- firm MUST pay the VAT out of their
business account, so In the client ledger you enter DR profit costs in business section and
then make a note of the vat due in the details. DR entry in the HMRC account for the
business.
When the firm sends out its bill- CR business section hmrc account
Agency: when the invoice addressed to the client do not distinguish VAT in the account, no
entry on firms HMRC account- all combined
When you deliver your bill for professional charges
You are acting for Anita Desai who is selling her flat, 2 Forest View, and buying a house,
The Old Vicarage. On 2 June you need to pay the following invoices:
An invoice for the estate agent’s fees on 2 Forest View of £2,000 plus VAT. The
invoice is addressed to Anita.
The key rules to focus on
Rule 2.1 – Definition of client money
Rule 2.3 – Receiving client money –
Distinguish client money from firm’s own money (and money not regulated
by SRA) Weston v The Law Society (1998)- there is a duty of stewardship
in relation to client money
Rule 4.2 – Mixed receipts
Rule 4.3 – Transfers of client money for costs
Rule 5 – withdrawals of client money
Rule 7 – Interest
Rule 8.1 – Ledgers and entries
Rule 11- third party managed accounts: money is not held by the solicitor or
the firm but by a third party page 103
Code of conduct principles
Principle 1- upholds the constitutional principle of the rule of law and
administration of justice
Principle 2- upholds trust and public confidence in the profession
Principle 3- independence
Principle 4- honesty
Principle 5- integrity
Principle 6- encourage equality, diversity and inclusion
Principle 7- acting in the best interests of each client
, Client ledger
When carrying on the balance following a finished ledger sheet, you
need to make sure you remember to put the client name and matter at
the top again.
Entry description on client ledger: Balance
Remember to use the date from the bottom of the last page.
Paying a disbursement:
If you are passing official copies on without comment, this IS a disbursement
and not taxed
If it is not a disbursement = TAXABLE SUPPLY- DR entry on business side
which is then added to the next VAT entry
Taxable supply example:
Page 132- shows ledger for taxable supply
Client: Bartok
Issue: purchase
Date Details Business account Client account
DR CR BAL DR CR BAL
May
1 Mining search 10 10DR
(taxable supply)
2
Local land charges 10 20DR
search(TREATED
AS
30 DISBURSEMENT) 300 320DR
Profit costs 382DR
VAT on £310 62
Passing on the VAT:
AGENCY-
Invoice is addressed to the client it is treated as made to the client
Firm acts as the agent passing on the money to the client
Send the suppliers tax invoice to the client
When paid using the agency method- pay from client account if sufficient
funds or business if not sufficient funds
SEND THEM THIS INVOICE
PRINCIPAL-
Invoice addressed to the firm- treated as made to the firm
, HAS TO BE PAID FROM BUSINESS ACCOUNT
When you deliver your bill of professional charges- thus you send an invoice
to him for your charges of the VAT
Bill client for profit costs and the disbursements and the VAT on those
Passing on the VAT- supply treated as made to the firm (P method)
Firm can treat this supply as input, use business money to pay the invoice
and tax
Firm them resupplies the item to the client for the same price- charging the
client the output tax (firm professional charges and disbursements)
Distinction between agency method and principal method of paying vat
Principal: when the invoice is addressed to the firm- firm MUST pay the VAT out of their
business account, so In the client ledger you enter DR profit costs in business section and
then make a note of the vat due in the details. DR entry in the HMRC account for the
business.
When the firm sends out its bill- CR business section hmrc account
Agency: when the invoice addressed to the client do not distinguish VAT in the account, no
entry on firms HMRC account- all combined
When you deliver your bill for professional charges
You are acting for Anita Desai who is selling her flat, 2 Forest View, and buying a house,
The Old Vicarage. On 2 June you need to pay the following invoices:
An invoice for the estate agent’s fees on 2 Forest View of £2,000 plus VAT. The
invoice is addressed to Anita.
