What Are The Rules For Solicitors’ Accounts?

by | Jul 21, 2022 | Blog

If you work as a solicitor, you’ll be familiar with the Solicitors Regulation Authority (SRA). As the main regulatory body for the industry, it has substantial power.

As well as providing a general code of conduct for British solicitors, the SRA also regulates the handling of money. It does this through a set of rules, known as the SRA accounts rules. These were simplified in 2019, but there is still room for confusion. 

In this blog post, we’ll take a look at the main accounting rules for solicitors, and what you can do to stay compliant. 

Keeping client money safe

One of the main aims of the SRA accounts rules is to ensure client money is held securely. If you’re keeping money on behalf of a customer, there are strict criteria you must meet:

  • client money must be kept separate from your own money in a dedicated client account
  • this account must be held at a branch or head office of a bank or building society in England or Wales
  • the name of the account must contain both the name of your firm and the word “client”
  • you can open a separate account for each client, or use a single account for all client money.

What about fees?

There may be times when you are holding money for a client, but some of it is owed to you as payment for your services. 

In the past, you were allowed to treat this as your own money, but this is no longer the case. Now, all client money, including any set aside for fees, belongs to the client until you have sent them a bill. Only then can you transfer the money to your own account. 

If you’re unable to bill a client, there’s a process for reclaiming the money owed to you. You’ll need to contact the SRA directly and ask them to authorise the transaction. 

Returning client money

The SRA accounts rules state that you should return client money once you no longer have any reason to keep it. Although no timeframe is given, you’re expected to do this as soon as possible, regardless of the amount. 

If you’re unable to return the money, e.g. because a client has died or become impossible to contact, you may donate it to charity. If you’re donating more than £500, you should clear the transaction with the SRA first. 

What records do I need to keep?

The accounts rules stipulate that any transactions involving client money should be recorded in detail. These records must be stored safely for at least six years. The SRA also provides a list of good accounting practices. These include:

  • using double entry bookkeeping to minimise errors
  • updating books on a regular basis
  • having a system in place for recording incoming client money, whether it is received electronically or by post. 

What should I do if I breach the rules?

Finding yourself in breach of the SRA accounts rules can be a cause for concern, but there’s no need to panic. 

Most breaches can be cleared up easily, but it’s important to be honest with the SRA about what has happened. The body has the power to impose fines, and these will be much higher if you’re found to be hiding a breach.  

As a senior member of the firm, it’s your responsibility to correct the error, even if you didn’t cause it. If client money has been taken by an employee, you’ll be expected to replace it with the firm’s money, whether or not you’re able to recover it. 

If you need advice on correcting a breach, or have any general questions about the SRA accounts rules, we’re here to help. 

Get in touch today.

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If there’s anything you’d like to know about Dunkley’s, we’d love to hear from you.