Solicitors Accounts V: Submission, Reduction and Payment of Bills Including the VAT Element
An extensive overview of Value Added Tax (VAT) regulations for law firms, focusing specifically on billing clients for professional charges and disbursements. The documents establish that solicitors must separately itemise professional fees, disbursements, and VAT on invoices and that any bill reductions require proportional VAT recalculations. Crucially, the sources differentiate between taxable legal services (which require VAT) and qualifying disbursements, which are costs incurred by the solicitor acting purely as an agent for the client and are therefore excluded from the firm's VAT supply. Finally, the texts explain the two primary methods for handling disbursements—the Agency Method (where the invoice is addressed to the client and no VAT is charged by the firm) and the Principal Method (where the invoice is addressed to the firm, and VAT must be charged to the client)—noting a special concession for handling counsel’s fees under the Agency Method.
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26:27
Solicitors Accounts IV: Accountants’ Reports, Recordkeeping, and SRA Rules Compliance
An outline of the stringent requirements for solicitors regarding the management of client money, focusing heavily on transparency and accountability through the SRA Accounts Rules. A central requirement is the mandatory obtaining and delivery of an accountant’s report within six months of the accounting period's end, serving as independent verification that client funds have been safeguarded and managed in compliance with rules, particularly regarding client accounts, withdrawals, and internal controls. Accountants must be qualified, and if they find serious issues, they issue a "qualified" report, triggering SRA scrutiny, though minor, quickly corrected breaches may not warrant qualification. Furthermore, firms must retain comprehensive accounting records for a minimum of six years to ensure traceability and auditability, and they are obligated to promptly correct any discovered breaches of the rules, documenting the nature of the breach and the remedial action taken immediately to mitigate risk and maintain client trust.
An extensive overview of Third-Party Managed Accounts (TPMAs), which solicitors can use to hold client funds via an independent, authorized provider, acting similarly to an escrow service. The text explains that because the solicitor does not directly hold the money, TPMA funds are exempt from standard SRA Accounts Rules but require solicitors to fulfill specific due diligence and client communication obligations. While TPMAs offer significant benefits like cost savings and enhanced security by transferring risk to a regulated third party, drawbacks include potential additional costs for clients and the solicitor's loss of direct control over disbursements. Solicitors must inform clients that TPMAs are regulated by the Financial Conduct Authority (FCA), not the Solicitors Regulation Authority (SRA), and must notify the SRA upon adopting this arrangement.
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29:15
Solicitors Accounts II: Operation of Joint Account; Operation of a Client’s Own Account
A detailed examination of how solicitors manage client funds through two distinct mechanisms: Joint Accounts and the Operation of a Client's Own Account. Joint Accounts are typically used in estate administration, involving shared control and responsibility between the solicitor and the client or third party, and though not classified as a traditional "client account," the funds remain client money under SRA Rules. Conversely, the Operation of a Client's Own Account occurs when a solicitor, often holding a power of attorney, manages funds directly in the client’s existing personal account. While most SRA Accounts Rules do not apply to either format, both require the solicitor to obtain bank statements at least every five weeks and maintain a central record of bills. A key difference is that reconciliation is required for the client's own account every five weeks, but not for a joint account, and solicitors must implement risk mitigation, such as recommending joint signatures for joint accounts.
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Solicitors Accounts I: Handling Client Money
A comprehensive overview of the Solicitors Regulation Authority (SRA) Accounts Rules, focusing on the rigorous standards for managing client funds in the legal profession. Key requirements include the strict separation of client money from business money in designated client accounts, mandated by Rule 4.1, to protect client interests and maintain public trust. The documents define crucial terms like client money (Rule 2.1) and disbursements, clarifying when anticipated costs transition from client funds to business funds. Furthermore, the sources emphasize that client accounts must not be used to provide general banking facilities (Rule 3.3), a prohibition supported by significant case law to prevent money laundering and insolvency risks. Finally, they outline rules for promptly transferring client money into the client account (Rule 2.3), ensuring funds are available on demand (Rule 2.4), detailing the specific circumstances for lawful withdrawals (Rule 5), and the obligation to account for a fair sum of interest on held funds (Rule 7).
Preparing for the 2026 Solicitors Qualifying Examination? This is your official test review podcast for the SQE brought to you by Young Central. Thirteen subject matters are broken down to ensure you can tackle every topic.
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