Solicitors Accounts Core Principles (complete deck) Flashcards
What is the difference between client money and business money?
Client money is held for a client/trust
Business money belongs to the solicitor/firm
If the client sends fees before a bill is delivered, the money remains in the client money pot.
You (a solicitor) hold £10,000 for Client A, but have £250,000 in your overall client bank account. Client A needs to pay £10,250 urgently but you can’t get hold of them. Where should the money come from?
You cannot take the extra £250 from the overall client bank account as it’s effectively using someone else’s money that you’re holding for them. Instead, you would use £250 from the business account.
Can you accept a cheque for both client funds and business funds?
Yes, put it into either account and then promptly transfer the correct funds across into the other.
What happens if you (a solicitor in a law firm) write a bill for £20,000 but don’t put ‘plus VAT’
It’s presumed that VAT is already included so the client is not expected to pay an additional 20%
What is a disbursement?
Fees charged by third parties for services e.g. surveyors and accountants.
It does not include the law firm costs e.g. photocopying etc.
How would you recommend paying disbursements based on VAT implications?
If a surveyor/accountant etc is required, recommend the surveyor address the bill to the client, but send it to the law firm to deal with.
If it is addressed to the law firm, the law firm has to charge the client VAT on the ‘resupply’, whereas if it is addressed to the client it is paid by the law firm through ‘agency’ therefore there is no VAT payable.
Who gets the interest on money held in the client account?
The law firm must pay a ‘reasonable’ amount of interest to the client. There are times when reasonable could mean £0.
