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SRA Accounts Rules [2018] Approved by SRA Board

June 2018

At long last, we now have a date on the horizon for the introduction of the new version of the SRA Accounts Rules. Whilst the consultation process started back in June 2016, it was only last week (14 June 2018) that the Solicitors Regulation Authority (SRA) announced that the SRA Accounts Rules [2018] have now been approved by the SRA Board and will, subject to the approval of the Legal Services Board (LSB), be introduced in April 2019.

The final version of the new SRA Accounts Rules as approved by the SRA Board has not changed significantly from the draft version of the SRA Accounts Rules 2018 as published by the SRA in June 2017. For a detailed analysis of the changes that have been made to the current SRA Accounts Rules 2011, see our article
Draft SRA Accounts Rules 2018 Published

If you have read our previous article linked above, you will be aware of a seemingly minor change in wording that will have a big impact on most law firms. Unfortunately, the SRA have not changed the wording of the new rule 4.3 and therefore, unless changed prior to the introduction of the new rules in April 2019, firms will need to amend their existing procedures in order to be compliant with this new and much more restrictive rule change on transferring costs from client to office account. In short, the obligation to send or give a bill to the client prior to transferring costs from client to office account will, in future, apply to the firm‘s ’costs‘ rather than the firm’s ‘fees’. This is because the definition of ‘costs’ comprises the firm‘s profit costs and disbursements whereas the definition of ’fees', which is used in the equivalent provision within the current SRA Accounts Rules 2011, is purely the profit cost element of the bill. Consequently, from next April, the new SRA Accounts Rules will mean that a firm will not be able to transfer funds held in client bank account, to cover disbursements paid out of office monies on behalf of the client, prior to giving or sending a bill to the client.

Whilst April 2019 may seem a long way off, firms really need to start planning now for the introduction of the new rules, particularly as there are still some aspects of the rules that could have an impact on many firms. For example, whilst under the new rules it will still be a breach of the SRA Accounts Rules to have residual client ledger balances, there are no specific provisions within the new version of the rules allowing smaller residual client ledger balances to be paid over to charity, as is currently the case under the SRA Accounts Rules 2011. Instead, the new rules make reference to withdrawing money “on the SRA‘s prior written authorisation or in prescribed circumstances”. It is expected that the SRA will publish guidance covering the payment of residual balances to charities and that this will form the ’prescribed circumstances' referred to in the draft rules. However, we do not know exactly what that guidance will say, or if it will be more onerous than the current provisions. Our advice to firms would be, given the uncertainty that exists, to deal with any residual client ledger balances under £500 in value under the existing rules. If you are struggling to find the time and resources to do so, our residual client ledger balance clearance service could be the solution you are looking.

Of course, it is not just the SRA Accounts Rules that are changing, the new SRA Handbook will also see the introduction of the new SRA Code of Conduct for Firms and the SRA Code of Conduct for Solicitors. Why not join us for our SRA Regulation Update course in London on Thursday 20 September 2018 at 9.30am? This course will focus on the new SRA Handbook and, in particular, the new SRA Accounts Rules, SRA Code of Conduct for Firms and the SRA Code of Conduct for Solicitors. With the number of delegates limited to twenty, book early to avoid disappointment. If you cannot make it to London on 20 September, the same course is being offered as a live webinar on Thursday 6 September 2018.

In the meantime, if you want a more detailed insight into the changes being made to the SRA Accounts Rules, our very popular SRA Accounts Rules: A Practical Guide to Compliance training course now considers the key changes under the new SRA Accounts Rules [2018] and the impact these will have on firms. We are also holding a one hour webinar, SRA Accounts Rules 2018: An Introduction to the New Rules, on 19 July 2018 at 10.00am which will look at the new SRA Accounts Rules in detail. Both the course and the webinar are presented by subject expert, Richard Lane.

The introduction of the new SRA Accounts Rules represents the ideal opportunity to provide in-house training for all fee earners and managers as well as your accounts staff. For more information about a bespoke in-house training course for your firm please contact Richard Lane by calling now on 0845 6500 112 or by e-mail to info@lfpro.co.uk.

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