Solicitors Accounts 2

Question 1

SRA Account Rule 7

Answer 1

You account to clients or third parties for a fair sum of interest on any client money held by you on their behalf.
You may by a written agreement come to a different arrangement with the client or the third party for whom the money is held as to the payment of interest, but you must provide sufficient information to enable them to give informed consent.

Question 2

SRA Account Rule 9

Answer 2

If, when acting in a client’s matter, you hold or receive money jointly with the client or a third party, Part 2 of these rules does not apply save for:
rule 8.2 - statements from banks, building societies and other financial institutions;
rule 8.4 - bills and notifications of costs.

Question 3

SRA Account Rule 10

Answer 3

Rule 10: Operation of a client’s own account
i
If, in the course of practice, you operate a client’s own account as signatory, Part 2 of these rules does not apply save for:
rule 8.2 - statements from banks, building societies and other financial institutions;
rule 8.3 - reconciliations;
rule 8.4 - bills and notifications of costs.

Question 4

SRA Account Rule 11

Answer 4

You may enter into arrangements with a client to use a third party managed account for the purpose of receiving payments from or on behalf of, or making payments to or on behalf of, the client in respect of regulated services delivered by you to the client, only if:
use of the account does not result in you receiving or holding the client’s money; and
you take reasonable steps to ensure, before accepting instructions, that the client is informed of and understands:
the terms of the contractual arrangements relating to the use of the third party managed account, and in particular how any fees for use of the third party managed account will be paid and who will bear them; and
the client’s right to terminate the agreement and dispute payment requests made by you.
You obtain regular statements from the provider of the third party managed account and ensure that these accurately reflect all transactions on the account.

Question 5

SRA Account Rule 12

Answer 5

If you have, at any time during an accounting period, held or received client money, or operated a joint account or a client’s own account as signatory, you must:
obtain an accountant’s report for that accounting period within six months of the end of the period; and
deliver it to the SRA within six months of the end of the accounting period if the accountant’s report is qualified to show a failure to comply with these rules, such that money belonging to clients or third parties is, or has been, or is likely to be placed, at risk.
You are not required to obtain an accountant’s report if:
all of the client money held or received during an accounting period is money received from the Legal Aid Agency; or
in the accounting period, the statement or passbook balance of client money you have held or received does not exceed:
an average of £10,000; and
a maximum of £250,000,
or the equivalent in foreign currency.
In rule 12.2 above a “statement or passbook balance” is the total balance of:
all client accounts held or operated by you; and
any joint accounts and clients’ own accounts operated by you,
as shown by the statements obtained under rule 8.2.
The SRA may require you to obtain or deliver an accountant’s report to the SRA on reasonable notice if you cease to operate as an authorised body and to hold or operate a client account, or the SRA considers that it is otherwise in the public interest to do so.
You ensure that any report obtained under this rule is prepared and signed by an accountant who is a member of one of the chartered accountancy bodies and who is, or works for, a registered auditor.
The SRA may disqualify an accountant from preparing a report for the purposes of this rule if:
the accountant has been found guilty by their professional body of professional misconduct or equivalent; or
the SRA is satisfied that the accountant has failed to exercise due care and skill in the preparation of a report under these rules.
The SRA may specify from time to time matters that you must ensure are incorporated into the terms on which an accountant is engaged.
You must provide to an accountant preparing a report under these rules:
details of all accounts held or operated by you in connection with your practice at any bank, building society or other financial institution at any time during the accounting period to which the report relates; and
all other information and documentation that the accountant requires to enable completion of their report.
The accountant must complete and sign their report in the prescribed form.

Question 6

VAT - Output and Input Tax

Answer 6

Input - charged to the business by its suppliers
Output - Charged by a business to its customers

Question 7

When is VAT chargeable?

Answer 7

Chargeable on the supply of goods or services where the supply is a taxable supply and is made by a taxable person in the course or furtherance of a business carried on by the taxable person (VAT act 1994 s4(1)).

Question 8

Supply of goods

Answer 8

All supply whereby the whole property in goods is transferred including a gift of goods.

Question 9

Supply of services

Answer 9

Not supply of goods, but done for consideration. A gratuitous supply of services is not exempt compared to gift of goods

Question 10

Taxable supply

Answer 10

Any supply of goods or services other than an exempt supply. Exemptions include - (except for new commercial sales and leases of commercial property where the supplier has opted to be taxable), insurance, some postal services, finance, health services and burial and cremation.

Question 11

Two types of taxable supplies

Answer 11

Those which are chargeable at standard rate (20%). Chargeable at zero-rate listed in sch 8 VATA 1994 - supplies of food,water, books, international services and transport.

Question 12

Reduced rate?

Answer 12

Reduced rate of 5% to mobility aids, domestic fuel, installation of energy-saving materials, smoking cessation products, renovation and alteration of certain dwellings and residential conversations, children’s car seats and carrycots with restraints straps

Question 13

Legal services?

Answer 13

Standard rate-supply. Include professional charges and some payments made for clients. Insurance is exempt.

Question 14

Taxable person

Answer 14

Required to be registered under VATA 1994. The value of taxable supplies (not profit) in the preceding 12 months exceeded a figure specified in each years Budget - £85,000 for 2023/4.
Voluntary registration permitted to recover input tax.

Question 15

Business

Answer 15

Chargeable on supplies made in the furtherance of business carried on by the taxable person.

Question 16

Input tax

Answer 16

May deduct the tax charged to them from the amount of output tax which they account for to HMRC s25(2).

Question 17

Time of supply

Answer 17

Time of supply determines the quarter at the end of which a taxable person becomes liable to account for output tax on a particular supply.
Goods - when goods removed or made available. s(6)(2)
Services - when services are completed s(6)(3)

Question 18

Variations to time of supply

Answer 18

If within 14 days after the basic tax point, the supplier issues a tax invoice, the date of the invoice will become the tax point, unless a longer period has been agreed by HMRC s6(5) and (6).
If before a tax point arises, the supplier issues a tax invoice or receives payment, the supply will to the extent covered by the invoice of payment, be treated as taking place at the date of the invoice or payment s(6)(4).

Question 19

Tax invoice obligations

Answer 19

• Within 30 days after the time of the supply.
  Must state the following particulars -
  an identifying number
  the date of the supply (tax point)
  the supplier’s name, address and VAT registration number
  the name and address of the person to whom the supply is made
  the type of supply e.g. - sale, loan, hire
  description of the goods or services supplied
  the quantity of the goods or extent of the services and the amount (excluding VAT) payable for each description
  total amount payable (excluding VAT)
  the rate of cash discount
  the rate and amount of tax charged.

Question 20

Collection and accounts