FLK2 · Solicitors Accounts

SRA Accounts Rules — principles & obligations

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

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.3.1 for where it is held and r.3.2 for its name; r.3.3 separately bars using it to provide banking facilities). 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 (client money outside a client account): where the only client money the firm holds falls within r.2.1(d) (its own fees and unpaid disbursements before a bill), any disbursement money relates to costs it has incurred and is liable for, and it maintains no client account for any other reason, it need not hold that money in a client account — provided it told the client in advance where and how it would be held. The money is still client money.
r.11 (third party managed accounts) is a different mechanism, not "the 2.2 exception": a firm may use a TPMA only if doing so does not result in it receiving or holding the client's money (r.11.1(a)), and only if it first takes reasonable steps to ensure the client understands the arrangement, who bears the TPMA fees, and the right to terminate and to dispute the firm's payment requests. Under r.11 the firm holds no client money; under r.2.2 it holds client money and simply holds it elsewhere.
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.

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A woman is the treasurer of a small amateur football club. Members pay £20 each month in cash. Under the club rules she accepted on becoming treasurer, she must bank the subscriptions into the club's dedicated account within seven days. One month she receives £200 in subscriptions and spends the cash on her own gas bill that same day. She intends to replace the money from her wages before anyone notices, and pays an equivalent £200 into the club account two weeks later. Which statement best explains how section 5(3) of the Theft Act 1968 applies to the subscriptions when she pays the gas bill?

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