Solicitors Accounts
Two accounts, one discipline
Client account holds client money; office account holds the firm's own money. Client money is money held or received for a client in connection with regulated services. It must be paid promptly into a client account unless an exception applies - for example, money received for fees and disbursements where a bill has been delivered, or money received as a trustee or where the client has agreed otherwise in writing.
Core prohibitions
The firm must never use client money for its own purposes, must not hold client money in an office account, and must not withdraw cash from a client account except in limited permitted circumstances. A bill must be delivered before fees can be transferred from client to office account (a written request is needed if the money is held for a bill of costs not yet delivered).
Records and reconciliation
Keep a client ledger for each client and a business ledger; run a three-way reconciliation at least every five weeks comparing bank statements, client ledger balances and the client account balance. Deal with any shortfall or excess immediately.
Interest and residual balances
Pay interest where it is fair and reasonable to do so. Return residual balances promptly; if a beneficiary cannot be traced after reasonable steps, the money may be donated to charity.
Common traps
Mixed receipts (part fees, part client money) must be split. Disbursements paid from the firm's own funds are office payments; agency disbursements are treated differently for VAT. Never "borrow" from one client's ledger to cover another's.
Rule of thumb: apply the three questions - whose money is it, where must it sit, and what record proves it?