Solicitors accounts
17.1(b)
VAT - ANSWER VAT is chargeable on the supply of services including searches at the point of
supply i.e. when you send the bill to the client. Not before!
VAT and lender's costs - ANSWER No separate ledger for the lender:
the profit costs and VAT for both the borrower and the lender will be recorded in the borrower's
office ledger.
Where there is a separate ledger for the lender:
the profit costs and VAT for each client are recorded in their respective office ledgers. The lender's
costs are then transferred to the borrower's office ledger in the usual way.
VAT exempt disbursements - ANSWER Litigation
court fees
damages Property stamp duty land tax
certain search fees e.g. the fees for a Local Authority Search/Central Land Charges Registry/Land
Registry Search fees for other applications made to the Land Registry e.g. to register a purchase
VAT shown on the invoice - ANSWER DR office ledger with the VAT payable on the profit costs
CR VAT account with the VAT
1.1 - ANSWER Overarching objective: keep client money safe
1.2(a) - ANSWER Must keep client money separate from office money by using separate client
account
13.2
12.8 - ANSWER Money held or received on behalf of the principal is office money
12.8(a) - ANSWER If partner buying using mortgage and firm instructed by mortgage lender then
client account
12.8(b) - ANSWER If partner buying jointly with spouse then client account
12.8(c) - ANSWER If partner acting for employee then client account
13.2 client account - ANSWER Bank account for client money
14.1 - ANSWER Client money must be paid into client account
14.2 - ANSWER rare occurrence when put office money into client account e.g. Money paid in
error out of client account
14.5 - ANSWER Client money received and paid into client account must relate to the work the
solicitor is carrying out for the client
20 - ANSWER When you can pay money out of the client account:
, Solicitors accounts
1. Required for payment to or on behalf of the client
2. Disbursements
3. To reimburse the solicitor
4. Transferring money between ledgers
5. Money drawn on clients instructions in writing
6. To pay solicitors bill of costs
7. Mixed money rule
29 - ANSWER Every solicitor must keep properly written up accounts
29. 2(b) client ledger - ANSWER Separate ledger for each individual client recording how
much money the solicitor holds on behalf of that particular client
29.4 Office ledger - ANSWER Separate ledger for each client recording how much money that
client owes the solicitor
31 - ANSWER SRA monitors and investigates solicitor compliance with the riles
32-45 - ANSWER Accountants must do reports
3rd party payments - solicitor acting as agent - ANSWER 1. the solicitor should not account for the
VAT separately, only for the gross (VAT-inclusive) amount of the payment; and
2. the payment should be made out of client money where possible
3rd party payments - solicitor acting as principal e.g. - ANSWER Payment of the accountant's
invoice by the solicitor:
DR office ledger with the net amount
CR office cash
+
DR VAT account with the VAT
CR office cash
Then Solicitor invoices the client for the accountant's costs when send bill:
DR office ledger with the profit costs
CR profit costs
+
DR office ledger with VAT
CR VAT account
17.1(b)
VAT - ANSWER VAT is chargeable on the supply of services including searches at the point of
supply i.e. when you send the bill to the client. Not before!
VAT and lender's costs - ANSWER No separate ledger for the lender:
the profit costs and VAT for both the borrower and the lender will be recorded in the borrower's
office ledger.
Where there is a separate ledger for the lender:
the profit costs and VAT for each client are recorded in their respective office ledgers. The lender's
costs are then transferred to the borrower's office ledger in the usual way.
VAT exempt disbursements - ANSWER Litigation
court fees
damages Property stamp duty land tax
certain search fees e.g. the fees for a Local Authority Search/Central Land Charges Registry/Land
Registry Search fees for other applications made to the Land Registry e.g. to register a purchase
VAT shown on the invoice - ANSWER DR office ledger with the VAT payable on the profit costs
CR VAT account with the VAT
1.1 - ANSWER Overarching objective: keep client money safe
1.2(a) - ANSWER Must keep client money separate from office money by using separate client
account
13.2
12.8 - ANSWER Money held or received on behalf of the principal is office money
12.8(a) - ANSWER If partner buying using mortgage and firm instructed by mortgage lender then
client account
12.8(b) - ANSWER If partner buying jointly with spouse then client account
12.8(c) - ANSWER If partner acting for employee then client account
13.2 client account - ANSWER Bank account for client money
14.1 - ANSWER Client money must be paid into client account
14.2 - ANSWER rare occurrence when put office money into client account e.g. Money paid in
error out of client account
14.5 - ANSWER Client money received and paid into client account must relate to the work the
solicitor is carrying out for the client
20 - ANSWER When you can pay money out of the client account:
, Solicitors accounts
1. Required for payment to or on behalf of the client
2. Disbursements
3. To reimburse the solicitor
4. Transferring money between ledgers
5. Money drawn on clients instructions in writing
6. To pay solicitors bill of costs
7. Mixed money rule
29 - ANSWER Every solicitor must keep properly written up accounts
29. 2(b) client ledger - ANSWER Separate ledger for each individual client recording how
much money the solicitor holds on behalf of that particular client
29.4 Office ledger - ANSWER Separate ledger for each client recording how much money that
client owes the solicitor
31 - ANSWER SRA monitors and investigates solicitor compliance with the riles
32-45 - ANSWER Accountants must do reports
3rd party payments - solicitor acting as agent - ANSWER 1. the solicitor should not account for the
VAT separately, only for the gross (VAT-inclusive) amount of the payment; and
2. the payment should be made out of client money where possible
3rd party payments - solicitor acting as principal e.g. - ANSWER Payment of the accountant's
invoice by the solicitor:
DR office ledger with the net amount
CR office cash
+
DR VAT account with the VAT
CR office cash
Then Solicitor invoices the client for the accountant's costs when send bill:
DR office ledger with the profit costs
CR profit costs
+
DR office ledger with VAT
CR VAT account
