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Part A - General

 

The Solicitors' Accounts Rules 1998 have been replaced on the 6 October 2011 by the SRA Accounts Rules 2011 as part of the introduction of outcomes-focused regulation.

Go to SRA Handbook

Part A of the Solicitors' Accounts Rules was amended on 31 March 2009 as part of a general updating of the rules to introduce firm-based regulation and legal disciplinary practices as provided for in the Legal Services Act 2007.

 

Made byAuthority: the Council of the Law Societymade under sections 32, 33A, 34 and 37 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985 with the concurrence, where requisite, of the Master of the Rolls under those sections and of the Lord Chancellor under paragraph 16 of Schedule 22 to the Legal Services Act 2007;

date: 22nd July 1998;

authority: sections 32, 33A, 34 and 37 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985;

replacing: the Solicitors' Accounts Rules 1991, the Solicitors' Accounts (Legal Aid Temporary Provision) Rule 1992 and the Accountant's Report Rules 1991;

regulating: the accounts of solicitors and their employees, registered European lawyers and their employees, registered foreign lawyers and lawyers, and recognised bodies and their managers and employees, in respect of their English and Welsh practicespractice in England and Wales.

Part A – General

Rule 1 – Principles

The following principles must be observed. A solicitor must:

    • (a)

      comply with the requirements of rule 1 of the Solicitors' Code of Conduct 2007 as to the solicitor's integrity, the duty to act in the client's best interests, and public trust in the solicitor and the solicitor's profession;

     

A solicitor must comply with the requirements of rule 1 of the Solicitors' Code of Conduct 2007, and in particular must:

    • (ba)

      keep other people's money separate from money belonging to the solicitor or the practice;

    • (cb)

      keep other people's money safely in a bank or building society account identifiable as a client account (except when the rules specifically provide otherwise);

    • (dc)

      use each client's money for that client's matters only;

    • (ed)

      use controlled trust moneymoney held as trustee of a trust for the purposes of that trust only;

    • (fe)

      establish and maintain proper accounting systems, and proper internal controls over those systems, to ensure compliance with the rules;

    • (gf)

      keep proper accounting records to show accurately the position with regard to the money held for each client and each controlledtrust;

    • (hg)

      account for interest on other people's money in accordance with the rules;

    • (ih)

      co-operate with the SocietySRA in checking compliance with the rules; and

    • (ji)

      deliver annual accountant's reports as required by the rules.

     
 

Rule 2 - Interpretation

  • (1)

    The rules are to be interpreted in the light of the notes.The notes form part of the rules and are mandatory.

  • (2)

    In the rules, unless the context otherwise requires:

    • (a)

      "accounting period" has the meaning given in rule 36;

    • (b)

      "agreed fee" has the meaning given in rule 19(5);

    • (ba)

      "approved regulator" means any body listed as an approved regulator in paragraph 1 of Schedule 4 to the Legal Services Act 2007 (whether or not that paragraph has been brought into force), or designated as an approved regulator by an order under paragraph 17 of that Schedule;

    • (bb)

      "authorised non-SRA firm" means a firm which is not authorised to practise by the SRA but is authorised to practise by another approved regulator;

    • (c)

      "bank" has the meaning given in section 87(1) of the Solicitors Act 1974;

    • (d)

      "building society" means a building society within the meaning of the Building Societies Act 1986;

    • (e)

      "client" means the person for whom a solicitor acts;

    • (f)

      "client account" has the meaning given in rule 14(2);

    • (g)

      "client money" has the meaning given in rule 13;

    • (h)

      a "controlled trust" arises when:

      • (i)

        a solicitor of the Supreme Court or registered European lawyer is the sole trustee of a trust, or co-trustee only with one or more of his or her partners or employees;

      • (ii)

        a registered foreign lawyer who practises in partnership with a solicitor of the Supreme Court or registered European lawyer is, by virtue of being a partner in that partnership, the sole trustee of a trust, or co-trustee only with one or more of the other partners or employees of that partnership;

      • (iii)

        a recognised body which is a company is the sole trustee of a trust, or co-trustee only with one or more of the recognised body's officers or employees; or

      • (iv)

        a recognised body which is a limited liability partnership is the sole trustee of a trust, or co-trustee only with one or more of the recognised body's members or employees;

      and "controlled trustee" means a trustee of a controlled trust; (see also paragraph (y) below on the meaning of "trustee" and "trust");[deleted]

    • (i)

      "controlled trust money" has the meaning given in rule 13;[deleted]

    • (j)

      "costs" means a solicitor's fees and disbursements;

    • (ja)

      "Court of Protection deputy" includes a deputy who was appointed by the Court of Protection as a receiver under the Mental Health Act 1983 before the commencement day of the Mental Capacity Act 2005;

    • (k)

      "disbursement" means any sum spent or to be spent by a solicitor on behalf of the client or controlledtrust (including any VAT element);

    • (l)

      "fees" of a solicitor means the solicitor's own charges or profit costs (including any VAT element);

    • (la)

      "firm" means a sole practitioner, partnership, LLP or company operating as a legal practice;

    • (m)

      "general client account" has the meaning given in rule 14(5)(b);

    • (ma)

      "lawyer" includes a barrister, notary, legal executive, licensed conveyancer, patent agent, trade mark agent or costs draftsman;

    • (mb)

      "LLP" means a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000;

    • (mc)

      "manager" means:

      • (i)

        a partner in a partnership;

      • (ii)

        a member of an LLP; or

      • (iii)

        a director of a company;

        
    • (n)

      "mixed payment" has the meaning given in rule 20(1);

    • (o)

      "non-solicitor employer" means any employer who or which is notother than a solicitoror authorised non-SRA firm;

    • (p)

      "office account" means an account of the solicitor or the practice for holding office money, or other means of holding office money (for example, the office cash box);

    • (q)

      "office money" has the meaning given in rule 13;

    • (qa)

      "partner" means a person who is or is held out as a partner in an unincorporated practice;

    • (qb)

      "partnership" means an unincorporated partnership, and includes any unincorporated practice in which persons are or are held out as partners, but does not include an LLPand does not include a limited liability partnership, and "partner" is to be construed accordingly;

    • (r)

      "principal" means:

      • (i)

        a sole practitioner;

      • (ii)

        a partneror a person held out as a partner (including a "salaried" or "associate" partner) in a partnership;

      • (iia)

        in the case of a recognised body which is an LLP or company, the recognised body itself;

      • (iii)

        the principal solicitorof the Supreme Court or registered European lawyer(or any one of the principal solicitorsthem) in an in-house practice employed by a non-solicitor employer(for example, in a law centre or in commerce and industry);

       
    • (s)

      "professional disbursement" means the fees of counsel or other lawyer, or of a professional or other agent or expert instructed by the solicitor;

    • (t)

      "recognised body" means a partnership, company or limited liability partnership LLP recognised by the SocietySRA under section 9 of the Administration of Justice Act 1985;

    • (ta)

      "recognised sole practitioner" means a solicitor of the Supreme Court or registered European lawyer authorised by the SRA under section 1B of the Solicitors Act 1974 to practise as a sole practitioner;

    • (ta)(tb)

      "registered European lawyer" means a person registered by the SocietySRA under regulation 17 of the European Communities (Lawyer's Practice) Regulations 2000;

    • (u)

      "registered foreign lawyer" means a person registered by the SocietySRA under section 89 of the Courts and Legal Services Act 1990;

    • (ua)

      "regular payment" has the meaning given in rule 21;

    • (v)

      "separate designated client account" has the meaning given in rule 14(5)(a);

    • (w)

      "Society" means the Law Society of England and Wales;[deleted]

    • (x)

      "solicitor" means:

      • (i)

        a solicitor of the Supreme Court; and for the purposes of these rules also includes:

      • (ii)

        a registered European lawyer;

      • (iii)

        a registered foreign lawyer practising:

        • (A)

          as a partnerin a partnershipwith a solicitor of the Supreme Court or registered European lawyerwhich is a recognised body or authorised non-SRA firm; or in a partnership which should be a recognised body but has not been recognised by the SRA; or

        • (B)

          as the director of a company which is a recognised bodywhich is a company or authorised non-SRA firm, or as the director of a company which is a manager of a recognised body or authorised non-SRA firm; or

        • (C)

          as a member of a an LLP which is a recognised body which is a limited liability partnership; or authorised non-SRA firm, or as a member of an LLP which is a manager of a recognised body or authorised non-SRA firm;

        • (D)

          as a partner in a partnership with separate legal personality which is a manager of a recognised body or authorised non-SRA firm;

        • (E)

          as an employee of a recognised body or recognised sole practitioner; or

        • (F)

          as an employee of a partnership which should be a recognised body but has not been authorised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

         
      • (iv)

        a recognised body; and a partnership including at least one solicitor of the Supreme Court, registered European lawyer or

      • (v)

        a manager of a recognised body;

      • (vi)

        an employee of a recognised body or recognised sole practitioner; or

      • (vii)

        an employee of a partnership which should be a recognised body but has not been authorised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

       
    • (xa)

      "solicitor-manager", in rule 22(8)(b), means a solicitor of the Supreme Court (or registered European lawyer) appointed by the personal representatives of a deceased sole practitioner to carry on the practice;

    • (xa)(xb)

      "solicitor of the Supreme Court" means an individual who is a solicitor of the Supreme Court of England and Wales; and, with effect from the coming into force of section 59(1) of the Constitutional Reform Act 2005, all references to a solicitor of the Supreme Court are to be replaced by references to a solicitor of the Senior Courts;

    • (xc)

      "SRA" means the Solicitors Regulation Authority, and reference to the SRA as an approved regulator means the SRA carrying out regulatory functions assigned to the Law Society as an approved regulator;

    • (y)

      "trustee" includes a personal representative (i.e. an executor or an administrator), and "trust" includes the duties of a personal representative; and

    • (z)

      "without delay" means, in normal circumstances, either on the day of receipt or on the next working day; and

    • (za)

      the singular includes the plural and vice versa, and references to the masculine or feminine include the neuter.

     

Notes

    • (i)

      Although many of the rules are expressed as applying to an individual solicitor, the effect of the definition of "solicitor" in rule 2(2)(x) is that the rules apply equally to all those who carry on or work in a practice and to the practice itself. See also rule 4(1)(a) rule 4(persons governed by the rules) and rule 5 (persons exempt from the rules). Note however that, until 1 July 2009, rules which are stated to apply to a recognised sole practitioner, or the employee of a recognised sole practitioner, will apply to a sole practitioner or the employee of a sole practitioner.

    • (ii)

      A client account must be at a bank or building society's branch in England and Wales - see rule 14(4).

    • (iii)

      For the full definition of a "European authorised institution" (rule 2(2)(c)), see the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992 no. 3218).

    • (iv)

      The definition of a controlled trust (rule 2(2)(h)), which derives from statute, gives rise to some anomalies. For example, a partner, assistant solicitor or consultant acting as sole trustee will be a controlled trustee. So will a sole solicitor trustee who is a director of a recognised body which is a company, or a member of a recognised body which is a limited liability partnership. Two or more partners acting as trustees will be controlled trustees. However two or more assistant solicitors or consultants acting as trustees will fall outside the definition, as will two or more directors of a recognised body which is a company, or two or more members of a recognised body which is a limited liability partnership. In these cases, if the matter is dealt with through the practice, the partners (or the recognised body) will hold any money as client money.[deleted]

    • (iva)

      Exceptionally, where a trust is handled by registered European lawyers, the trustees might be two partners at the firm's head office in the home state who are not directly subject to the rules. Money in the trust should be held by the firm as client money. However it should be treated as if it were controlled trust money in relation to choice of account, accounting for interest, etc., to ensure that there is no breach of duty by the trustees.

    • (v)

      The fees of interpreters, translators, process servers, surveyors, estate agents, etc., instructed by the solicitor are professional disbursements (see rule 2(2)(s)). Travel agents' charges are not professional disbursements.

    • (vi)

      The general definition of "office account" is wide (see rule 2(2)(p)). However, rule 19(1)(b) (receipt and transfer of costs) and rule 21(1)(b) and 21(2)(b) (payments from the Legal Services Commission) specify that certain money is to be placed in an office account at a bank or building society.

    • (vii)

      An index is attached to the rules but it does not form part of the rules. For the status of the flowchart (Appendix 1) and the chart dealing with special situations (Appendix 2), see note (xiii) to rule 13.

     
 

Rule 3 - Geographical scope

The rules apply to practice carried on from an office in England and Wales.

Note

  • Accounts of a practice carried on from an office outside England and Wales are governed by the Solicitors' Code of Conduct 2007 rule 15.27 (accounts), rule 15.15 (deposit interest) and rule 20.068 (production of documents and information).

 

Rule 4 - Persons governed by the rules

  • (1)

    The rules apply to:

    • (a)

      solicitors of the Supreme Court or registered European lawyers who are:

      • (i)

        sole practitioners;

      • (ii)

        partners in a practice, or held out as partners (including "salaried" and "associate" partners)partnership which is a recognised body or authorised non-SRA firm, or in a partnership which should be a recognised body but has not been recognised by the SRA;

      • (iii)

        assistants, associates, professional support lawyers, consultants or locums, locums or persons otherwise employed in a private the practice of a recognised body, recognised sole practitioner or authorised non-SRA firm; or of a partnership which should be a recognised body but has not been recognised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

      • (iv)

        employed as in-house solicitorslawyers by a non-solicitor employer (for example, in a law centre or in commerce and industry);

      • (v)

        directors of recognised bodies which are companies; or companies which are recognised bodies or authorised non-SRA firms, or of companies which are managers of recognised bodies or authorised non-SRA firms;

      • (vi)

        members of recognised bodies which are limited liability partnerships;LLPs which are recognised bodies or authorised non-SRA firms, or of LLPs which are managers of recognised bodies or authorised non-SRA firms; or

      • (vii)

        partners in a partnership with separate legal personality which is a manager of a recognised body or authorised non-SRA firm;

       
    • (aa)

      registered European lawyers who are:

      • (i)

        sole practitioners;

      • (ii)

        partners in a practice, or held out as partners (including "salaried" and "associate" partners);

      • (iii)

        assistants, associates, consultants or locums in a private practice;

      • (iv)

        employed as in-house lawyers (for example, in a law centre or in commerce and industry);

      • (v)

        directors of recognised bodies which are companies; or

      • (vi)

        members of recognised bodies which are limited liability partnerships;

        
    • (b)

      registered foreign lawyers who are:

      • (i)

        practising in partnership with solicitors of the Supreme Court or registered European lawyers, or held out as partners (including "salaried" and "associate" partners) of solicitors of the Supreme Court or registered European lawyers;

      • (ii)

        directors of recognised bodies which are companies; or

      • (iii)

        members of recognised bodies which are limited liability partnerships; and any of the ways set out in rule 2(2)(x)(iii);

       
    • (c)

      recognised bodies;

    • (d)

      managers and employees of a recognised body, or of a partnership which should be a recognised body but has not been authorised by the SRA; and

    • (e)

      employees of a recognised sole practitioner, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA.

     
  • (2)

    Part F of the rules (accountants' reports) also applies to reporting accountants.

Notes

    • (i)

      In practical terms, the rules also bind anyone else working in a practice, such as cashiers and non-lawyer fee earners. All employees of a recognised body are directly subject to the rules, following the amendment of section 9 of the Administration of Justice Act 1985 by the Legal Services Act 2007. All employees of a recognised sole practitioner are also directly subject to the rules as from the coming into force of new sections 1B and 34A of the Solicitors Act 1974. Non-compliance by any member of staff will also lead to the principals being in breach of the rules - see rule 6. Misconduct by an employee can also lead to an order of the SRA or the Solicitors'Solicitors Disciplinary Tribunal under section 43 of the Solicitors Act 1974 imposing restrictions on his or her employment.

    • (ii)

      Solicitors who have held or received client money or controlled trust money, but no longer do so, whether or not they continue in practice, continue to be bound by some of the rules - for instance:

       
    • (iii)

      The rules do not cover a solicitor's trusteeships carried on in a purely personal capacity outside any legal practice. It will normally be clear from the terms of the appointment whether the solicitor is being appointed trustee in a purely personal capacity or in his or her professional capacity. If a solicitor is charging for the work, it is clearly being done as solicitor. Use of professional stationery may also indicate that the work is being done in a professional capacity.

    • (iv)

      A solicitor who wishes to retire from private practice must make a decision about any professional trusteeship. There are three possibilities:

      • (a)

        continue to act as a professional trustee (as evidenced by, for instance, charging for work done, or by continuing to use the title "solicitor" in connection with the trust). In this case, the solicitor must continue to hold a practising certificate, and money subject to the trust must continue to be dealt with in accordance with the rules.

      • (b)

        continue to act as trustee, but in a purely personal capacity. In this case, the solicitor must stop charging for the work, and must not be held out as a solicitor (unless this is qualified by words such as "non-practising" or "retired") in connection with the trust.

      • (c)

        cease to be a trustee.

       
     
 

Rule 5 - Persons exempt from the rules

The rules do not apply to:

    • (a)

      a solicitor when practising as an employee of:

      • (i)

        a local authority;

      • (ii)

        statutory undertakers;

      • (iii)

        a body whose accounts are audited by the Comptroller and Auditor General;

      • (iv)

        the Duchy of Lancaster;

      • (v)

        the Duchy of Cornwall; or

      • (vi)

        the Church Commissioners; or

       
    • (b)

      a solicitor who practises as the Solicitor of the City of London; or

    • (c)

      a solicitor when carrying out the functions of:

      • (i)

        a coroner or other judicial office; or

      • (ii)

        a sheriff or under-sheriff; or

       
    • (d)

      a solicitor when practising as a manager or employee of an authorised non-SRA firm and acting within the scope of that firm's authorisation to practise.

     

Notes

    • (i)

      "Statutory undertakers" means:

      • (a)

        any persons authorised by any enactment to carry on any railway, light railway, tramway, road transport, water transport, canal, inland navigation, dock, harbour, pier or lighthouse undertaking or any undertaking for the supply of hydraulic power; and

      • (b)

        any licence holder within the meaning of the Electricity Act 1989, any public gas supplier, any water or sewerage undertaker, the Environment Agency, any public telecommunications operator, the Post Office, the Civil Aviation Authority and any relevant airport operator within the meaning of Part V of the Airports Act 1986.

       
    • (ii)

      "Local authority" means any of those bodies which are listed in section 270 of the Local Government Act 1972 or in section 21(1) of the Local Government and Housing Act 1989.

    • (iii)

      A solicitor practising as a manager or employee of an authorised non-SRA firm is exempt from the Solicitors' Accounts Rules when the solicitor is acting within the scope of the firm's authorisation. Thus if a solicitor is a partner or employee in a firm authorised by the Council for Licensed Conveyancers, the rules will not apply to any money received by the solicitor in connection with conveyancing work. However if the solicitor does in-house litigation work - say collecting money owed to the firm - the Solicitors' Accounts Rules will apply to any money received by the solicitor in that context. This is because, whilst in-house litigation work is within the scope of the solicitor's authorisation as an individual, it is outside the scope of authorisation of the firm.

     
 

Rule 6 - Principals' responsibility for compliance

All the principals in a practice must ensure compliance with the rules by the principals themselves and by everyone else workingemployed in the practice. This duty also extends to the directors of a recognised body which is a company, or to the members of a recognised body which is a limited liability partnershipan LLP, and to the recognised body itself.

Rule 7 - Duty to remedy breaches

  • (1)

    Any breach of the rules must be remedied promptly upon discovery. This includes the replacement of any money improperly withheld or withdrawn from a client account.

  • (2)

    In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the practice. This duty extends to replacing missing client moneyor controlled trust moneyfrom the principals' own resources, even if the money has been misappropriated by an employee or fellowanotherprincipal, and whether or not a claim is subsequently made on the Solicitors' Indemnity or Compensation Funds or on the firm'sfirm's insurance.

  • (3)

    In the case of a recognised body, this duty falls on the recognised body itself.

Note

  • For payment of interest when money should have been held in a client account but was not, see rule 24(2).

 

Rule 8 - Controlled trustees[repealed]

A solicitor who in the course of practice acts as a controlled trustee must treat the controlled trust money as if it were client money, except when the rules provide to the contrary.

Note

  • The following are examples of controlled trust money being treated differently from client money:
    • rule 18 (controlled trust money withheld from a client account) - special provisions for controlled trusts, in place of rules 16 and 17 (which apply to client money);
    • rule 19(2), and note (xi) to rule 19 - original bill etc., to be kept on file, in addition to central record or file of copy bills;
    • rule 23, note (v) and rule 32, note (ii)(d) - controlled trustees may delegate to an outside manager the day to day keeping of accounts of the business or property portfolio of an estate or trust;
    • rule 24(7), and note (x) to rule 24 - interest;
    • rule 32(7) - quarterly reconciliations.
     
  

Rule 9 - Liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes

  • (1)

    A solicitor who in the course of practice acts as

    • a liquidator,
    • a trustee in bankruptcy,
    • a Court of Protection deputy, or
    • a trustee of an occupational pension scheme which is subject to section 47(1)(a) of the Pensions Act 1995 (appointment of an auditor)andsection 49(1) (separate bank account)and regulations under section 49(2)(b) (books and records),

    must comply with:

    • (a)

      the appropriate statutory rules or regulations;

    • (b)

      the principles set out in rule 1; and

    • (c)

      the requirements of paragraphs (2) to (4) below;

    and will then be deemed to have satisfactorily complied with the Solicitors' Accounts Rules.

  • (2)

    In respect of any records kept under the appropriate statutory rules, there must also be compliance with:

     
  • (3)

    If a liquidator or trustee in bankruptcy uses any of the practice's client accounts for holding money pending transfer to the Insolvency Services Account or to a local bank account authorised by the Secretary of State, he or she must comply with the Solicitors' Accounts Rules in all respects whilst the money is held in the client account.

  • (4)

    If the appropriate statutory rules or regulations do not govern the holding or receipt of client money in a particular situation (for example, money below a certain limit), the solicitor must comply with the Solicitors' Accounts Rules in all respects in relation to that money.

Notes

    • (i)

      The Insolvency Regulations 1994 (S.I. 1994 no. 2507) regulate liquidators and trustees in bankruptcy.

    • (ii)

      The Court of Protection Rules 2007 (S.I. 2007 no. 1744 (L.12)) regulate Court of Protection deputies (see rule 2(2)(ja)).

    • (iii)

      Money held or received by solicitor liquidators, trustees in bankruptcy,and Court of Protection deputies and trustees of occupational pension schemes is client money but, because of the statutory rules and rule 9(1), it will not normally be kept in a client account. If for any reason it is held in a client account, the Solicitors' Accounts Rules apply to that money for the time it is so held (see rule 9(3) and (4)).

    • (iv)

      Money held or received by solicitor trustees of occupational pension schemes is either client money or controlled trust money but, because of the statutory rules and rule 9(1), it will not normally be kept in a client account. If for any reason it is held in a client account, the Solicitors' Accounts Rules apply to that money for the time it is so held (see rule 9(4)).

     
 

Rule 10 - Joint accounts

  • (1)

    If a solicitor acting in a client's matter holds or receives money jointly with the client, another solicitors' practice or another third party, the rules in general do not apply, but the following must be complied with:

     

Operation of the joint account by the solicitor only

  • (2)

    If the joint account is operated only by the solicitor, the solicitor must ensure that he or she receives the statements from the bank, building society or other financial institution, and has possession of any passbooks.

Shared operation of the joint account

  • (3)

    If the solicitor shares the operation of the joint account with the client, another solicitor's practice or another third party, the solicitor must:

    • (a)

      ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 32(9)(b)(ii); and

    • (b)

      ensure that he or she either has possession of any passbooks, or takes copies of the passbook entries before handing any passbook to the other signatory, and retains them in accordance with rule 32(9)(b)(ii).

     

Operation of the joint account by the other account holder

  • (4)

    If the joint account is operated solely by the other account holder, the solicitor must ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 32(9)(b)(ii).

Note

  • Although a joint account is not a client account, money held in a joint account is client money.

 

Rule 11 - Operation of a client's own account

  • (1)

    If a solicitor in the course of practice operates a client's own account as signatory (for example, as donee under a power of attorney), the rules in general do not apply, but the following must be complied with:

     

Operation by the solicitor only

  • (2)

    If the account is operated by the solicitor only, the solicitor must ensure that he or she receives the statements from the bank, building society or other financial institution, and has possession of any passbooks.

Shared operation of the account

  • (3)

    If the solicitor shares the operation of the account with the client or a co-attorney outside the solicitor's practice, the solicitor must:

    • (a)

      ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 33(1) to (3); and

    • (b)

      ensure that he or she either has possession of any passbooks, or takes copies of the passbook entries before handing any passbook to the client or co-attorney, and retains them in accordance with rule 33(1) to (3).

     

Operation of the account for a limited purpose

  • (4)

    If the solicitor is given authority (whether as attorney or otherwise) to operate the account for a limited purpose only, such as the taking up of a share rights issue during the client's temporary absence, the solicitor need not receive statements or possess passbooks, provided that he or she retains details of all cheques drawn or paid in, and retains copies of all passbook entries, relating to the transaction, and retains them in accordance with rule 33(1) and (2).

Application

  • (5)

    This rule applies only to solicitors in private practice.

Notes

    • (i)

      Money held in a client's own account (under a power of attorney or otherwise) is not "client money" for the purpose of the rules because it is not "held or received" by the solicitor. If the solicitor closes the account and receives the closing balance, this becomes client money and must be paid into a client account, unless the client instructs to the contrary in accordance with rule 16(1)(a).

    • (ii)

      A solicitor who merely pays money into a client's own account, or helps the client to complete forms in relation to such an account, is not "operating" the account.

    • (iii)

      A solicitor executor who operates the deceased's account (whether before or after the grant of probate) will be subject to the limited requirements of rule 11. If the account is subsequently transferred into the solicitor's name, or a new account is opened in the solicitor's name, the solicitor will have "held or received" controlled trust money (or client money) money and is then subject to all the rules.

    • (iv)

      The rules do not cover money held or received by a solicitor attorney acting in a purely personal capacity outside any legal practice. If a solicitor is charging for the work, it is clearly being done in the course of legal practice. See rule 4, note (iv) for the choices which can be made on retirement from private practice.

    • (v)

      "A client's own account" covers all accounts in a client's own name, whether opened by the client himself or herself, or by the solicitor on the client's instructions under rule 16(1)(b).

    • (vi)

      "A client's own account" also includes an account opened in the name of a person designated by the client under rule 16(1)(b).

    • (vii)

      Solicitors should also remember the requirements of rule 32(8) - bills and notifications of costs.

    • (viii)

      For payment of interest, see rule 24, note (iii).

     
 

Rule 12 - Solicitor's rights not affected

Nothing in these rules deprives a solicitor of any recourse or right, whether by way of lien, set off, counterclaim, charge or otherwise, against money standing to the credit of a client account.

Rule 13 - Categories of money

All money held or received in the course of practice falls into one or other of the following categories:

    • (a)

      "client money" - money held or received for a client or as trustee, and all other money which is not controlled trust money or office money; or

    • (b)

      "controlled trust money" - money held or received for a controlled trust; or

    • (c)(b)

      "office money" - money which belongs to the solicitor or the practice.

     

Notes

    • (i)

      "Client money" includes money held or received:

      • (aa)

        as trustee;

      • (a)

        as agent, bailee, stakeholder, or as the donee of a power of attorney, or as a liquidator, trustee in bankruptcy, or Court of Protection deputy or trustee of an occupational pension scheme;

      • (b)

        for payment of unpaid professional disbursements (for definition of "professional disbursement" see rule 2(2)(s));

      • (c)

        for payment of stamp duty land tax, Land Registry registration fees, telegraphic transfer fees and court fees; this is not office money because the solicitor has not incurred an obligation to the Inland Revenue, the Land Registry, the bank or the court to pay the duty or fee (contrast with note (xi)(c)(C) below); (on the other hand, if the solicitor has already paid the duty or fee out of his or her own resources, or has received the service on credit, payment subsequently received from the client will be office money - see note (xi)(c)(B) below);

      • (d)

        as a payment on account of costs generally;

      • (e)

        as commission paid in respect of a solicitor's client, unless the client has given the solicitor prior authority to retain it in accordance with practice rule 10rule 2.06 of the Solicitors' Code of Conduct 2007, or unless it falls within the £20 de minimis figure specified in that rule.

       
    • (ii)

      A solicitor to whom a cheque or draft is made out, and who in the course of practice endorses it over to a client or employer, has received client money. Even if no other client money is held or received, the solicitor will be subject to some provisions of the rules, e.g.:

       
    • (iii)

      Money held by solicitor liquidators, trustees in bankruptcy, Court of Protection deputies and solicitors who are trustees of occupational pension schemes will either beis client money or controlled trust money, according to the circumstancessubject to a limited application of the rules – see rule 9.

    • (iv)

      Money held jointly with another person outside the practice (for example, with a lay trustee, or with another firm of solicitors) is client money subject to a limited application of the rules - see rule 10.

    • (v)

      Money held to the sender's order is client money.

      • (a)

        If money is accepted on such terms, it must be held in a client account.

      • (b)

        However, a cheque or draft sent to a solicitor on terms that the cheque or draft (as opposed to the money) is held to the sender's order must not be presented for payment without the sender's consent.

      • (c)

        The recipient is always subject to a professional obligation to return the money, or the cheque or draft, to the sender on demand.

       
    • (vi)

      An advance to a client from the solicitor which is paid into a client account under rule 15(2)(b) becomes client money. For interest, see rule 24(3)(e).

    • (vii)

      Money subject to a trust will be either:

      • (a)

        controlled trust money (basically if members of the practice are the only trustees, but see the detailed definition of "controlled trust" in rule 2(2)(h)); or

      • (b)

        client money (if the trust is not a controlled trust; typically the solicitor will be co-trustee with a lay person, or is acting for lay trustees).[deleted]

       
    • (viii)

      If the Law SocietySRA intervenes in a practice, money from the practice is held or received by the Society'sSRA's intervention agent subject to a trust under Schedule 1 paragraph 7(1) of the Solicitors Act 1974, and is therefore controlled trustclient money. The same provision requires the agent to pay the money into a client account.

    • (ix)

      A solicitor who, as the donee of a power of attorney, operates the donor's own account is subject to a limited application of these rules - see rule 11. Money kept in the donor's own account is not "client money", because it is not "held or received" by the solicitor.

    • (x)

      Money held or received by a solicitor in the course of his or her employment when practising in one of the capacities listed in rule 5 (persons exempt from the rules) is not "client money" for the purpose of the rules, because the rules do not apply at all.

    • (xi)

      Office money includes:

      • (a)

        money held or received in connection with running the practice; for example, PAYE, or VAT on the firm's fees;

      • (b)

        interest on general client accounts; the bank or building society should be instructed to credit such interest to the office account - but see also rule 15(2)(d), and note (vi) to rule 15 for interest on controlled trust money; and

      • (c)

        payments received in respect of:

        • (A)

          fees due to the practice against a bill or written notification of costs incurred, which has been given or sent in accordance with rule 19(2);

        • (B)

          disbursements already paid by the practice (for definition of "disbursement" see rule 2(2)(k));

        • (C)

          disbursements incurred but not yet paid by the practice, but excluding unpaid professional disbursements (for definition of "professional disbursement" see rule 2(2)(s), and note (v) to rule 2);

        • (D)

          money paid for or towards an agreed fee - see rule 19(5); and

         
      • (d)

        money held in a client account and earmarked for costs under rule 19(3) (transfer of costs from client account to office account); and

      • (e)

        money held or received from the Legal Services Commission as a regular payment (see rule 21(2)).

       
    • (xii)

      A solicitor cannot be his or her own client for the purpose of the rules, so that if a practice conducts a personal or office transaction - for instance, conveyancing - for a principal (or for a number of principals), money held or received on behalf of the principal(s) is office money. However, other circumstances may mean that the money is client money, for example:

      • (a)

        If the practice also acts for a lender, money held or received on behalf of the lender is client money.

      • (b)

        If the practice acts for a principal and, for example, his or her spouse jointly (assuming the spouse is not a partner in the practice), money received on their joint behalf is client money.

      • (c)

        If the practice acts for an assistant solicitor, consultant or non-solicitor employee, or (if it is a company) a director, or (if it is a limited liability partnershipan LLP) a member, he or she is regarded as a client of the practice, and money received for him or her is client money - even if he or she conducts the matter personally.

      • (d)

        See also note (iva) to rule 2 (money held on behalf of trustees who are head office partners of a registered European lawyer is client money).

       
    • (xiii)

      For a flowchart summarising the effect of the rules, see Appendix 1. For more details of the treatment of different types of money, see the chart "Special situations - what applies" at Appendix 2. These two appendices are included to help solicitors and their staff find their way about the rules. Unlike the notes, they are not intended to affect the meaning of the rules.

     
 
7/1/2007 12:00:00 AM

Part A - General

 

The Solicitors' Accounts Rules 1998 have been replaced on the 6 October 2011 by the SRA Accounts Rules 2011 as part of the introduction of outcomes-focused regulation.

Go to SRA Handbook

Part A of the Solicitors' Accounts Rules was amended on 31 March 2009 as part of a general updating of the rules to introduce firm-based regulation and legal disciplinary practices as provided for in the Legal Services Act 2007.

 

Made byAuthority: the Council of the Law Societymade under sections 32, 33A, 34 and 37 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985 with the concurrence, where requisite, of the Master of the Rolls under those sections and of the Lord Chancellor under paragraph 16 of Schedule 22 to the Legal Services Act 2007;

date: 22nd July 1998;

authority: sections 32, 33A, 34 and 37 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985;

replacing: the Solicitors' Accounts Rules 1991, the Solicitors' Accounts (Legal Aid Temporary Provision) Rule 1992 and the Accountant's Report Rules 1991;

regulating: the accounts of solicitors and their employees, registered European lawyers and their employees, registered foreign lawyers and lawyers, and recognised bodies and their managers and employees, in respect of their English and Welsh practicespractice in England and Wales.

Part A – General

Rule 1 – Principles

The following principles must be observed. A solicitor must:

    • (a)

      comply with the requirements of rule 1 of the Solicitors' Code of Conduct 2007 as to the solicitor's integrity, the duty to act in the client's best interests, and public trust in the solicitor and the solicitor's profession;

     

A solicitor must comply with the requirements of rule 1 of the Solicitors' Code of Conduct 2007, and in particular must:

    • (ba)

      keep other people's money separate from money belonging to the solicitor or the practice;

    • (cb)

      keep other people's money safely in a bank or building society account identifiable as a client account (except when the rules specifically provide otherwise);

    • (dc)

      use each client's money for that client's matters only;

    • (ed)

      use controlled trust moneymoney held as trustee of a trust for the purposes of that trust only;

    • (fe)

      establish and maintain proper accounting systems, and proper internal controls over those systems, to ensure compliance with the rules;

    • (gf)

      keep proper accounting records to show accurately the position with regard to the money held for each client and each controlledtrust;

    • (hg)

      account for interest on other people's money in accordance with the rules;

    • (ih)

      co-operate with the SocietySRA in checking compliance with the rules; and

    • (ji)

      deliver annual accountant's reports as required by the rules.

     
 

Rule 2 - Interpretation

  • (1)

    The rules are to be interpreted in the light of the notes.The notes form part of the rules and are mandatory.

  • (2)

    In the rules, unless the context otherwise requires:

    • (a)

      "accounting period" has the meaning given in rule 36;

    • (b)

      "agreed fee" has the meaning given in rule 19(5);

    • (ba)

      "approved regulator" means any body listed as an approved regulator in paragraph 1 of Schedule 4 to the Legal Services Act 2007 (whether or not that paragraph has been brought into force), or designated as an approved regulator by an order under paragraph 17 of that Schedule;

    • (bb)

      "authorised non-SRA firm" means a firm which is not authorised to practise by the SRA but is authorised to practise by another approved regulator;

    • (c)

      "bank" has the meaning given in section 87(1) of the Solicitors Act 1974;

    • (d)

      "building society" means a building society within the meaning of the Building Societies Act 1986;

    • (e)

      "client" means the person for whom a solicitor acts;

    • (f)

      "client account" has the meaning given in rule 14(2);

    • (g)

      "client money" has the meaning given in rule 13;

    • (h)

      a "controlled trust" arises when:

      • (i)

        a solicitor of the Supreme Court or registered European lawyer is the sole trustee of a trust, or co-trustee only with one or more of his or her partners or employees;

      • (ii)

        a registered foreign lawyer who practises in partnership with a solicitor of the Supreme Court or registered European lawyer is, by virtue of being a partner in that partnership, the sole trustee of a trust, or co-trustee only with one or more of the other partners or employees of that partnership;

      • (iii)

        a recognised body which is a company is the sole trustee of a trust, or co-trustee only with one or more of the recognised body's officers or employees; or

      • (iv)

        a recognised body which is a limited liability partnership is the sole trustee of a trust, or co-trustee only with one or more of the recognised body's members or employees;

      and "controlled trustee" means a trustee of a controlled trust; (see also paragraph (y) below on the meaning of "trustee" and "trust");[deleted]

    • (i)

      "controlled trust money" has the meaning given in rule 13;[deleted]

    • (j)

      "costs" means a solicitor's fees and disbursements;

    • (ja)

      "Court of Protection deputy" includes a deputy who was appointed by the Court of Protection as a receiver under the Mental Health Act 1983 before the commencement day of the Mental Capacity Act 2005;

    • (k)

      "disbursement" means any sum spent or to be spent by a solicitor on behalf of the client or controlledtrust (including any VAT element);

    • (l)

      "fees" of a solicitor means the solicitor's own charges or profit costs (including any VAT element);

    • (la)

      "firm" means a sole practitioner, partnership, LLP or company operating as a legal practice;

    • (m)

      "general client account" has the meaning given in rule 14(5)(b);

    • (ma)

      "lawyer" includes a barrister, notary, legal executive, licensed conveyancer, patent agent, trade mark agent or costs draftsman;

    • (mb)

      "LLP" means a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000;

    • (mc)

      "manager" means:

      • (i)

        a partner in a partnership;

      • (ii)

        a member of an LLP; or

      • (iii)

        a director of a company;

        
    • (n)

      "mixed payment" has the meaning given in rule 20(1);

    • (o)

      "non-solicitor employer" means any employer who or which is notother than a solicitoror authorised non-SRA firm;

    • (p)

      "office account" means an account of the solicitor or the practice for holding office money, or other means of holding office money (for example, the office cash box);

    • (q)

      "office money" has the meaning given in rule 13;

    • (qa)

      "partner" means a person who is or is held out as a partner in an unincorporated practice;

    • (qb)

      "partnership" means an unincorporated partnership, and includes any unincorporated practice in which persons are or are held out as partners, but does not include an LLPand does not include a limited liability partnership, and "partner" is to be construed accordingly;

    • (r)

      "principal" means:

      • (i)

        a sole practitioner;

      • (ii)

        a partneror a person held out as a partner (including a "salaried" or "associate" partner) in a partnership;

      • (iia)

        in the case of a recognised body which is an LLP or company, the recognised body itself;

      • (iii)

        the principal solicitorof the Supreme Court or registered European lawyer(or any one of the principal solicitorsthem) in an in-house practice employed by a non-solicitor employer(for example, in a law centre or in commerce and industry);

       
    • (s)

      "professional disbursement" means the fees of counsel or other lawyer, or of a professional or other agent or expert instructed by the solicitor;

    • (t)

      "recognised body" means a partnership, company or limited liability partnership LLP recognised by the SocietySRA under section 9 of the Administration of Justice Act 1985;

    • (ta)

      "recognised sole practitioner" means a solicitor of the Supreme Court or registered European lawyer authorised by the SRA under section 1B of the Solicitors Act 1974 to practise as a sole practitioner;

    • (ta)(tb)

      "registered European lawyer" means a person registered by the SocietySRA under regulation 17 of the European Communities (Lawyer's Practice) Regulations 2000;

    • (u)

      "registered foreign lawyer" means a person registered by the SocietySRA under section 89 of the Courts and Legal Services Act 1990;

    • (ua)

      "regular payment" has the meaning given in rule 21;

    • (v)

      "separate designated client account" has the meaning given in rule 14(5)(a);

    • (w)

      "Society" means the Law Society of England and Wales;[deleted]

    • (x)

      "solicitor" means:

      • (i)

        a solicitor of the Supreme Court; and for the purposes of these rules also includes:

      • (ii)

        a registered European lawyer;

      • (iii)

        a registered foreign lawyer practising:

        • (A)

          as a partnerin a partnershipwith a solicitor of the Supreme Court or registered European lawyerwhich is a recognised body or authorised non-SRA firm; or in a partnership which should be a recognised body but has not been recognised by the SRA; or

        • (B)

          as the director of a company which is a recognised bodywhich is a company or authorised non-SRA firm, or as the director of a company which is a manager of a recognised body or authorised non-SRA firm; or

        • (C)

          as a member of a an LLP which is a recognised body which is a limited liability partnership; or authorised non-SRA firm, or as a member of an LLP which is a manager of a recognised body or authorised non-SRA firm;

        • (D)

          as a partner in a partnership with separate legal personality which is a manager of a recognised body or authorised non-SRA firm;

        • (E)

          as an employee of a recognised body or recognised sole practitioner; or

        • (F)

          as an employee of a partnership which should be a recognised body but has not been authorised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

         
      • (iv)

        a recognised body; and a partnership including at least one solicitor of the Supreme Court, registered European lawyer or

      • (v)

        a manager of a recognised body;

      • (vi)

        an employee of a recognised body or recognised sole practitioner; or

      • (vii)

        an employee of a partnership which should be a recognised body but has not been authorised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

       
    • (xa)

      "solicitor-manager", in rule 22(8)(b), means a solicitor of the Supreme Court (or registered European lawyer) appointed by the personal representatives of a deceased sole practitioner to carry on the practice;

    • (xa)(xb)

      "solicitor of the Supreme Court" means an individual who is a solicitor of the Supreme Court of England and Wales; and, with effect from the coming into force of section 59(1) of the Constitutional Reform Act 2005, all references to a solicitor of the Supreme Court are to be replaced by references to a solicitor of the Senior Courts;

    • (xc)

      "SRA" means the Solicitors Regulation Authority, and reference to the SRA as an approved regulator means the SRA carrying out regulatory functions assigned to the Law Society as an approved regulator;

    • (y)

      "trustee" includes a personal representative (i.e. an executor or an administrator), and "trust" includes the duties of a personal representative; and

    • (z)

      "without delay" means, in normal circumstances, either on the day of receipt or on the next working day; and

    • (za)

      the singular includes the plural and vice versa, and references to the masculine or feminine include the neuter.

     

Notes

    • (i)

      Although many of the rules are expressed as applying to an individual solicitor, the effect of the definition of "solicitor" in rule 2(2)(x) is that the rules apply equally to all those who carry on or work in a practice and to the practice itself. See also rule 4(1)(a) rule 4(persons governed by the rules) and rule 5 (persons exempt from the rules). Note however that, until 1 July 2009, rules which are stated to apply to a recognised sole practitioner, or the employee of a recognised sole practitioner, will apply to a sole practitioner or the employee of a sole practitioner.

    • (ii)

      A client account must be at a bank or building society's branch in England and Wales - see rule 14(4).

    • (iii)

      For the full definition of a "European authorised institution" (rule 2(2)(c)), see the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992 no. 3218).

    • (iv)

      The definition of a controlled trust (rule 2(2)(h)), which derives from statute, gives rise to some anomalies. For example, a partner, assistant solicitor or consultant acting as sole trustee will be a controlled trustee. So will a sole solicitor trustee who is a director of a recognised body which is a company, or a member of a recognised body which is a limited liability partnership. Two or more partners acting as trustees will be controlled trustees. However two or more assistant solicitors or consultants acting as trustees will fall outside the definition, as will two or more directors of a recognised body which is a company, or two or more members of a recognised body which is a limited liability partnership. In these cases, if the matter is dealt with through the practice, the partners (or the recognised body) will hold any money as client money.[deleted]

    • (iva)

      Exceptionally, where a trust is handled by registered European lawyers, the trustees might be two partners at the firm's head office in the home state who are not directly subject to the rules. Money in the trust should be held by the firm as client money. However it should be treated as if it were controlled trust money in relation to choice of account, accounting for interest, etc., to ensure that there is no breach of duty by the trustees.

    • (v)

      The fees of interpreters, translators, process servers, surveyors, estate agents, etc., instructed by the solicitor are professional disbursements (see rule 2(2)(s)). Travel agents' charges are not professional disbursements.

    • (vi)

      The general definition of "office account" is wide (see rule 2(2)(p)). However, rule 19(1)(b) (receipt and transfer of costs) and rule 21(1)(b) and 21(2)(b) (payments from the Legal Services Commission) specify that certain money is to be placed in an office account at a bank or building society.

    • (vii)

      An index is attached to the rules but it does not form part of the rules. For the status of the flowchart (Appendix 1) and the chart dealing with special situations (Appendix 2), see note (xiii) to rule 13.

     
 

Rule 3 - Geographical scope

The rules apply to practice carried on from an office in England and Wales.

Note

  • Accounts of a practice carried on from an office outside England and Wales are governed by the Solicitors' Code of Conduct 2007 rule 15.27 (accounts), rule 15.15 (deposit interest) and rule 20.068 (production of documents and information).

 

Rule 4 - Persons governed by the rules

  • (1)

    The rules apply to:

    • (a)

      solicitors of the Supreme Court or registered European lawyers who are:

      • (i)

        sole practitioners;

      • (ii)

        partners in a practice, or held out as partners (including "salaried" and "associate" partners)partnership which is a recognised body or authorised non-SRA firm, or in a partnership which should be a recognised body but has not been recognised by the SRA;

      • (iii)

        assistants, associates, professional support lawyers, consultants or locums, locums or persons otherwise employed in a private the practice of a recognised body, recognised sole practitioner or authorised non-SRA firm; or of a partnership which should be a recognised body but has not been recognised by the SRA, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA;

      • (iv)

        employed as in-house solicitorslawyers by a non-solicitor employer (for example, in a law centre or in commerce and industry);

      • (v)

        directors of recognised bodies which are companies; or companies which are recognised bodies or authorised non-SRA firms, or of companies which are managers of recognised bodies or authorised non-SRA firms;

      • (vi)

        members of recognised bodies which are limited liability partnerships;LLPs which are recognised bodies or authorised non-SRA firms, or of LLPs which are managers of recognised bodies or authorised non-SRA firms; or

      • (vii)

        partners in a partnership with separate legal personality which is a manager of a recognised body or authorised non-SRA firm;

       
    • (aa)

      registered European lawyers who are:

      • (i)

        sole practitioners;

      • (ii)

        partners in a practice, or held out as partners (including "salaried" and "associate" partners);

      • (iii)

        assistants, associates, consultants or locums in a private practice;

      • (iv)

        employed as in-house lawyers (for example, in a law centre or in commerce and industry);

      • (v)

        directors of recognised bodies which are companies; or

      • (vi)

        members of recognised bodies which are limited liability partnerships;

        
    • (b)

      registered foreign lawyers who are:

      • (i)

        practising in partnership with solicitors of the Supreme Court or registered European lawyers, or held out as partners (including "salaried" and "associate" partners) of solicitors of the Supreme Court or registered European lawyers;

      • (ii)

        directors of recognised bodies which are companies; or

      • (iii)

        members of recognised bodies which are limited liability partnerships; and any of the ways set out in rule 2(2)(x)(iii);

       
    • (c)

      recognised bodies;

    • (d)

      managers and employees of a recognised body, or of a partnership which should be a recognised body but has not been authorised by the SRA; and

    • (e)

      employees of a recognised sole practitioner, or of a sole practitioner who should be a recognised sole practitioner but has not been authorised by the SRA.

     
  • (2)

    Part F of the rules (accountants' reports) also applies to reporting accountants.

Notes

    • (i)

      In practical terms, the rules also bind anyone else working in a practice, such as cashiers and non-lawyer fee earners. All employees of a recognised body are directly subject to the rules, following the amendment of section 9 of the Administration of Justice Act 1985 by the Legal Services Act 2007. All employees of a recognised sole practitioner are also directly subject to the rules as from the coming into force of new sections 1B and 34A of the Solicitors Act 1974. Non-compliance by any member of staff will also lead to the principals being in breach of the rules - see rule 6. Misconduct by an employee can also lead to an order of the SRA or the Solicitors'Solicitors Disciplinary Tribunal under section 43 of the Solicitors Act 1974 imposing restrictions on his or her employment.

    • (ii)

      Solicitors who have held or received client money or controlled trust money, but no longer do so, whether or not they continue in practice, continue to be bound by some of the rules - for instance:

       
    • (iii)

      The rules do not cover a solicitor's trusteeships carried on in a purely personal capacity outside any legal practice. It will normally be clear from the terms of the appointment whether the solicitor is being appointed trustee in a purely personal capacity or in his or her professional capacity. If a solicitor is charging for the work, it is clearly being done as solicitor. Use of professional stationery may also indicate that the work is being done in a professional capacity.

    • (iv)

      A solicitor who wishes to retire from private practice must make a decision about any professional trusteeship. There are three possibilities:

      • (a)

        continue to act as a professional trustee (as evidenced by, for instance, charging for work done, or by continuing to use the title "solicitor" in connection with the trust). In this case, the solicitor must continue to hold a practising certificate, and money subject to the trust must continue to be dealt with in accordance with the rules.

      • (b)

        continue to act as trustee, but in a purely personal capacity. In this case, the solicitor must stop charging for the work, and must not be held out as a solicitor (unless this is qualified by words such as "non-practising" or "retired") in connection with the trust.

      • (c)

        cease to be a trustee.

       
     
 

Rule 5 - Persons exempt from the rules

The rules do not apply to:

    • (a)

      a solicitor when practising as an employee of:

      • (i)

        a local authority;

      • (ii)

        statutory undertakers;

      • (iii)

        a body whose accounts are audited by the Comptroller and Auditor General;

      • (iv)

        the Duchy of Lancaster;

      • (v)

        the Duchy of Cornwall; or

      • (vi)

        the Church Commissioners; or

       
    • (b)

      a solicitor who practises as the Solicitor of the City of London; or

    • (c)

      a solicitor when carrying out the functions of:

      • (i)

        a coroner or other judicial office; or

      • (ii)

        a sheriff or under-sheriff; or

       
    • (d)

      a solicitor when practising as a manager or employee of an authorised non-SRA firm and acting within the scope of that firm's authorisation to practise.

     

Notes

    • (i)

      "Statutory undertakers" means:

      • (a)

        any persons authorised by any enactment to carry on any railway, light railway, tramway, road transport, water transport, canal, inland navigation, dock, harbour, pier or lighthouse undertaking or any undertaking for the supply of hydraulic power; and

      • (b)

        any licence holder within the meaning of the Electricity Act 1989, any public gas supplier, any water or sewerage undertaker, the Environment Agency, any public telecommunications operator, the Post Office, the Civil Aviation Authority and any relevant airport operator within the meaning of Part V of the Airports Act 1986.

       
    • (ii)

      "Local authority" means any of those bodies which are listed in section 270 of the Local Government Act 1972 or in section 21(1) of the Local Government and Housing Act 1989.

    • (iii)

      A solicitor practising as a manager or employee of an authorised non-SRA firm is exempt from the Solicitors' Accounts Rules when the solicitor is acting within the scope of the firm's authorisation. Thus if a solicitor is a partner or employee in a firm authorised by the Council for Licensed Conveyancers, the rules will not apply to any money received by the solicitor in connection with conveyancing work. However if the solicitor does in-house litigation work - say collecting money owed to the firm - the Solicitors' Accounts Rules will apply to any money received by the solicitor in that context. This is because, whilst in-house litigation work is within the scope of the solicitor's authorisation as an individual, it is outside the scope of authorisation of the firm.

     
 

Rule 6 - Principals' responsibility for compliance

All the principals in a practice must ensure compliance with the rules by the principals themselves and by everyone else workingemployed in the practice. This duty also extends to the directors of a recognised body which is a company, or to the members of a recognised body which is a limited liability partnershipan LLP, and to the recognised body itself.

Rule 7 - Duty to remedy breaches

  • (1)

    Any breach of the rules must be remedied promptly upon discovery. This includes the replacement of any money improperly withheld or withdrawn from a client account.

  • (2)

    In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the practice. This duty extends to replacing missing client moneyor controlled trust moneyfrom the principals' own resources, even if the money has been misappropriated by an employee or fellowanotherprincipal, and whether or not a claim is subsequently made on the Solicitors' Indemnity or Compensation Funds or on the firm'sfirm's insurance.

  • (3)

    In the case of a recognised body, this duty falls on the recognised body itself.

Note

  • For payment of interest when money should have been held in a client account but was not, see rule 24(2).

 

Rule 8 - Controlled trustees[repealed]

A solicitor who in the course of practice acts as a controlled trustee must treat the controlled trust money as if it were client money, except when the rules provide to the contrary.

Note

  • The following are examples of controlled trust money being treated differently from client money:
    • rule 18 (controlled trust money withheld from a client account) - special provisions for controlled trusts, in place of rules 16 and 17 (which apply to client money);
    • rule 19(2), and note (xi) to rule 19 - original bill etc., to be kept on file, in addition to central record or file of copy bills;
    • rule 23, note (v) and rule 32, note (ii)(d) - controlled trustees may delegate to an outside manager the day to day keeping of accounts of the business or property portfolio of an estate or trust;
    • rule 24(7), and note (x) to rule 24 - interest;
    • rule 32(7) - quarterly reconciliations.
     
  

Rule 9 - Liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes

  • (1)

    A solicitor who in the course of practice acts as

    • a liquidator,
    • a trustee in bankruptcy,
    • a Court of Protection deputy, or
    • a trustee of an occupational pension scheme which is subject to section 47(1)(a) of the Pensions Act 1995 (appointment of an auditor)andsection 49(1) (separate bank account)and regulations under section 49(2)(b) (books and records),

    must comply with:

    • (a)

      the appropriate statutory rules or regulations;

    • (b)

      the principles set out in rule 1; and

    • (c)

      the requirements of paragraphs (2) to (4) below;

    and will then be deemed to have satisfactorily complied with the Solicitors' Accounts Rules.

  • (2)

    In respect of any records kept under the appropriate statutory rules, there must also be compliance with:

     
  • (3)

    If a liquidator or trustee in bankruptcy uses any of the practice's client accounts for holding money pending transfer to the Insolvency Services Account or to a local bank account authorised by the Secretary of State, he or she must comply with the Solicitors' Accounts Rules in all respects whilst the money is held in the client account.

  • (4)

    If the appropriate statutory rules or regulations do not govern the holding or receipt of client money in a particular situation (for example, money below a certain limit), the solicitor must comply with the Solicitors' Accounts Rules in all respects in relation to that money.

Notes

    • (i)

      The Insolvency Regulations 1994 (S.I. 1994 no. 2507) regulate liquidators and trustees in bankruptcy.

    • (ii)

      The Court of Protection Rules 2007 (S.I. 2007 no. 1744 (L.12)) regulate Court of Protection deputies (see rule 2(2)(ja)).

    • (iii)

      Money held or received by solicitor liquidators, trustees in bankruptcy,and Court of Protection deputies and trustees of occupational pension schemes is client money but, because of the statutory rules and rule 9(1), it will not normally be kept in a client account. If for any reason it is held in a client account, the Solicitors' Accounts Rules apply to that money for the time it is so held (see rule 9(3) and (4)).

    • (iv)

      Money held or received by solicitor trustees of occupational pension schemes is either client money or controlled trust money but, because of the statutory rules and rule 9(1), it will not normally be kept in a client account. If for any reason it is held in a client account, the Solicitors' Accounts Rules apply to that money for the time it is so held (see rule 9(4)).

     
 

Rule 10 - Joint accounts

  • (1)

    If a solicitor acting in a client's matter holds or receives money jointly with the client, another solicitors' practice or another third party, the rules in general do not apply, but the following must be complied with:

     

Operation of the joint account by the solicitor only

  • (2)

    If the joint account is operated only by the solicitor, the solicitor must ensure that he or she receives the statements from the bank, building society or other financial institution, and has possession of any passbooks.

Shared operation of the joint account

  • (3)

    If the solicitor shares the operation of the joint account with the client, another solicitor's practice or another third party, the solicitor must:

    • (a)

      ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 32(9)(b)(ii); and

    • (b)

      ensure that he or she either has possession of any passbooks, or takes copies of the passbook entries before handing any passbook to the other signatory, and retains them in accordance with rule 32(9)(b)(ii).

     

Operation of the joint account by the other account holder

  • (4)

    If the joint account is operated solely by the other account holder, the solicitor must ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 32(9)(b)(ii).

Note

  • Although a joint account is not a client account, money held in a joint account is client money.

 

Rule 11 - Operation of a client's own account

  • (1)

    If a solicitor in the course of practice operates a client's own account as signatory (for example, as donee under a power of attorney), the rules in general do not apply, but the following must be complied with:

     

Operation by the solicitor only

  • (2)

    If the account is operated by the solicitor only, the solicitor must ensure that he or she receives the statements from the bank, building society or other financial institution, and has possession of any passbooks.

Shared operation of the account

  • (3)

    If the solicitor shares the operation of the account with the client or a co-attorney outside the solicitor's practice, the solicitor must:

    • (a)

      ensure that he or she receives the statements or duplicate statements from the bank, building society or other financial institution and retains them in accordance with rule 33(1) to (3); and

    • (b)

      ensure that he or she either has possession of any passbooks, or takes copies of the passbook entries before handing any passbook to the client or co-attorney, and retains them in accordance with rule 33(1) to (3).

     

Operation of the account for a limited purpose

  • (4)

    If the solicitor is given authority (whether as attorney or otherwise) to operate the account for a limited purpose only, such as the taking up of a share rights issue during the client's temporary absence, the solicitor need not receive statements or possess passbooks, provided that he or she retains details of all cheques drawn or paid in, and retains copies of all passbook entries, relating to the transaction, and retains them in accordance with rule 33(1) and (2).

Application

  • (5)

    This rule applies only to solicitors in private practice.

Notes

    • (i)

      Money held in a client's own account (under a power of attorney or otherwise) is not "client money" for the purpose of the rules because it is not "held or received" by the solicitor. If the solicitor closes the account and receives the closing balance, this becomes client money and must be paid into a client account, unless the client instructs to the contrary in accordance with rule 16(1)(a).

    • (ii)

      A solicitor who merely pays money into a client's own account, or helps the client to complete forms in relation to such an account, is not "operating" the account.

    • (iii)

      A solicitor executor who operates the deceased's account (whether before or after the grant of probate) will be subject to the limited requirements of rule 11. If the account is subsequently transferred into the solicitor's name, or a new account is opened in the solicitor's name, the solicitor will have "held or received" controlled trust money (or client money) money and is then subject to all the rules.

    • (iv)

      The rules do not cover money held or received by a solicitor attorney acting in a purely personal capacity outside any legal practice. If a solicitor is charging for the work, it is clearly being done in the course of legal practice. See rule 4, note (iv) for the choices which can be made on retirement from private practice.

    • (v)

      "A client's own account" covers all accounts in a client's own name, whether opened by the client himself or herself, or by the solicitor on the client's instructions under rule 16(1)(b).

    • (vi)

      "A client's own account" also includes an account opened in the name of a person designated by the client under rule 16(1)(b).

    • (vii)

      Solicitors should also remember the requirements of rule 32(8) - bills and notifications of costs.

    • (viii)

      For payment of interest, see rule 24, note (iii).

     
 

Rule 12 - Solicitor's rights not affected

Nothing in these rules deprives a solicitor of any recourse or right, whether by way of lien, set off, counterclaim, charge or otherwise, against money standing to the credit of a client account.

Rule 13 - Categories of money

All money held or received in the course of practice falls into one or other of the following categories:

    • (a)

      "client money" - money held or received for a client or as trustee, and all other money which is not controlled trust money or office money; or

    • (b)

      "controlled trust money" - money held or received for a controlled trust; or

    • (c)(b)

      "office money" - money which belongs to the solicitor or the practice.

     

Notes

    • (i)

      "Client money" includes money held or received:

      • (aa)

        as trustee;

      • (a)

        as agent, bailee, stakeholder, or as the donee of a power of attorney, or as a liquidator, trustee in bankruptcy, or Court of Protection deputy or trustee of an occupational pension scheme;

      • (b)

        for payment of unpaid professional disbursements (for definition of "professional disbursement" see rule 2(2)(s));

      • (c)

        for payment of stamp duty land tax, Land Registry registration fees, telegraphic transfer fees and court fees; this is not office money because the solicitor has not incurred an obligation to the Inland Revenue, the Land Registry, the bank or the court to pay the duty or fee (contrast with note (xi)(c)(C) below); (on the other hand, if the solicitor has already paid the duty or fee out of his or her own resources, or has received the service on credit, payment subsequently received from the client will be office money - see note (xi)(c)(B) below);

      • (d)

        as a payment on account of costs generally;

      • (e)

        as commission paid in respect of a solicitor's client, unless the client has given the solicitor prior authority to retain it in accordance with practice rule 10rule 2.06 of the Solicitors' Code of Conduct 2007, or unless it falls within the £20 de minimis figure specified in that rule.

       
    • (ii)

      A solicitor to whom a cheque or draft is made out, and who in the course of practice endorses it over to a client or employer, has received client money. Even if no other client money is held or received, the solicitor will be subject to some provisions of the rules, e.g.:

       
    • (iii)

      Money held by solicitor liquidators, trustees in bankruptcy, Court of Protection deputies and solicitors who are trustees of occupational pension schemes will either beis client money or controlled trust money, according to the circumstancessubject to a limited application of the rules – see rule 9.

    • (iv)

      Money held jointly with another person outside the practice (for example, with a lay trustee, or with another firm of solicitors) is client money subject to a limited application of the rules - see rule 10.

    • (v)

      Money held to the sender's order is client money.

      • (a)

        If money is accepted on such terms, it must be held in a client account.

      • (b)

        However, a cheque or draft sent to a solicitor on terms that the cheque or draft (as opposed to the money) is held to the sender's order must not be presented for payment without the sender's consent.

      • (c)

        The recipient is always subject to a professional obligation to return the money, or the cheque or draft, to the sender on demand.

       
    • (vi)

      An advance to a client from the solicitor which is paid into a client account under rule 15(2)(b) becomes client money. For interest, see rule 24(3)(e).

    • (vii)

      Money subject to a trust will be either:

      • (a)

        controlled trust money (basically if members of the practice are the only trustees, but see the detailed definition of "controlled trust" in rule 2(2)(h)); or

      • (b)

        client money (if the trust is not a controlled trust; typically the solicitor will be co-trustee with a lay person, or is acting for lay trustees).[deleted]

       
    • (viii)

      If the Law SocietySRA intervenes in a practice, money from the practice is held or received by the Society'sSRA's intervention agent subject to a trust under Schedule 1 paragraph 7(1) of the Solicitors Act 1974, and is therefore controlled trustclient money. The same provision requires the agent to pay the money into a client account.

    • (ix)

      A solicitor who, as the donee of a power of attorney, operates the donor's own account is subject to a limited application of these rules - see rule 11. Money kept in the donor's own account is not "client money", because it is not "held or received" by the solicitor.

    • (x)

      Money held or received by a solicitor in the course of his or her employment when practising in one of the capacities listed in rule 5 (persons exempt from the rules) is not "client money" for the purpose of the rules, because the rules do not apply at all.

    • (xi)

      Office money includes:

      • (a)

        money held or received in connection with running the practice; for example, PAYE, or VAT on the firm's fees;

      • (b)

        interest on general client accounts; the bank or building society should be instructed to credit such interest to the office account - but see also rule 15(2)(d), and note (vi) to rule 15 for interest on controlled trust money; and

      • (c)

        payments received in respect of:

        • (A)

          fees due to the practice against a bill or written notification of costs incurred, which has been given or sent in accordance with rule 19(2);

        • (B)

          disbursements already paid by the practice (for definition of "disbursement" see rule 2(2)(k));

        • (C)

          disbursements incurred but not yet paid by the practice, but excluding unpaid professional disbursements (for definition of "professional disbursement" see rule 2(2)(s), and note (v) to rule 2);

        • (D)

          money paid for or towards an agreed fee - see rule 19(5); and

         
      • (d)

        money held in a client account and earmarked for costs under rule 19(3) (transfer of costs from client account to office account); and

      • (e)

        money held or received from the Legal Services Commission as a regular payment (see rule 21(2)).

       
    • (xii)

      A solicitor cannot be his or her own client for the purpose of the rules, so that if a practice conducts a personal or office transaction - for instance, conveyancing - for a principal (or for a number of principals), money held or received on behalf of the principal(s) is office money. However, other circumstances may mean that the money is client money, for example:

      • (a)

        If the practice also acts for a lender, money held or received on behalf of the lender is client money.

      • (b)

        If the practice acts for a principal and, for example, his or her spouse jointly (assuming the spouse is not a partner in the practice), money received on their joint behalf is client money.

      • (c)

        If the practice acts for an assistant solicitor, consultant or non-solicitor employee, or (if it is a company) a director, or (if it is a limited liability partnershipan LLP) a member, he or she is regarded as a client of the practice, and money received for him or her is client money - even if he or she conducts the matter personally.

      • (d)

        See also note (iva) to rule 2 (money held on behalf of trustees who are head office partners of a registered European lawyer is client money).

       
    • (xiii)

      For a flowchart summarising the effect of the rules, see Appendix 1. For more details of the treatment of different types of money, see the chart "Special situations - what applies" at Appendix 2. These two appendices are included to help solicitors and their staff find their way about the rules. Unlike the notes, they are not intended to affect the meaning of the rules.

     
 
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