SRA Accounts Rules — principles & obligations

SA.02 — SRA Accounts Rules: Principles & Obligations

Source: SRA Accounts Rules 2019 (in force 25 Nov 2019), made under the Legal Services Act 2007 and the SRA's regulatory framework. They sit alongside the SRA Principles and Code of Conduct. They are deliberately short and outcomes-focused, not a prescriptive bookkeeping manual.

Core purpose

Keep client money safe and separate from the firm's own money, and account to clients for it. Breach risks SRA enforcement and personal liability — accounts rules compliance is a non-delegable duty of the firm and its managers.

The key definitions and rules

• Client money (r.2.1): money held/received relating to regulated services — including money held as trustee, on account of costs, or for any other reason for a client/third party. Know all four limbs.
• Separation (r.4.1): keep client money in a client account (a bank/building society account in England & Wales, with "client" in the title — r.3.2/3.3). It must be separate from business money.
• Prompt banking (r.2.3): client money paid into a client account promptly.
• Withdrawals (r.5.1): withdraw only for the purpose for which it is held and on proper authority; and only if sufficient funds are held for that client (r.5.3) — never overdraw one client's ledger using another's money.
• Returning money (r.2.5): return client money promptly as soon as there is no longer any proper reason to hold it.
• Costs/disbursements: bill before transferring money for costs from client to business account; pay disbursements when due.
• Reconciliations (r.8.3): five-weekly reconciliations of client account, signed off by a manager/COFA.
• Accountant's report (r.12): obtain within 6 months of period end; only deliver a qualified report to the SRA. Low-turnover firms (≤ £10,000 client money average / ≤ £250,000 max) are exempt.

Traps and distinctions to nail

• Mixed receipts: a payment that is part client / part business money must reach a client account or be allocated properly (r.4.2 permits limited handling).
• r.2.2 exception: a firm can operate without holding client money if it routes all fees/disbursements through a third-party managed account (TPMA) (operated under r.11).
• Business money (firm's own fees once billed, interest the firm keeps) must not sit in the client account beyond what the rules allow.
• Interest: account to the client for a fair sum of interest (r.7) — there is no fixed statutory rate; the firm sets a written policy.
• Breach correction: rectify promptly and replace any shortfall from the firm's own money.