Definition (Client money)-FS

Question 1

What is ‘client money’ under Rule 2.1 of the SRA Accounts Rules?

Answer 1

Money held or received by a solicitor relating to:
1. Regulated services delivered to a client

2. On behalf of a third party in relation to such services (e.g. as agent, stakeholder, or to the sender’s order)
3. As a trustee or specified officeholder (e.g. power of attorney holder or court of protection deputy)
4. In respect of solicitor’s fees or unpaid disbursements, if held prior to delivery of a bill

Question 2

What is Office Money (Business Money)

Answer 2

Money that belongs to the solicitor’s firm, including payments made after a bill has been delivered for solicitor’s fees or paid disbursements.

Question 3

When does money held in respect of solicitor’s fees or disbursements cease to be client money?

Answer 3

When a bill (invoice) is delivered to the client. At that point, it becomes office money.

Question 4

What is the status of money received on account of costs before a bill is issued?

Answer 4

It is client money because it is held in advance of billing.

Question 5

Is money received for solicitor’s fees after a bill has been issued considered client money?

Answer 5

No. It is considered business/office money.

Question 6

Is money paid to settle an invoice for both solicitor’s fees and a paid disbursement client money?

Answer 6

No. Because the disbursement has already been paid and the client has received a bill.

Question 7

Is money paid to settle an invoice covering both solicitor’s fees and unpaid disbursements client money?

Answer 7

No. Even though the disbursement is unpaid, the issuance of a bill means the payment is office money.

Question 8

Examples of client money under Rule 2.1

Answer 8

• Funds held as agent or stakeholder
• Funds held as trustee, e.g. court of protection deputy
• Money held on account of costs before billing
• Unbilled disbursements paid in advance

Question 9

Is money received from a client generally on account of costs (without a bill) considered client money?

Answer 9

Yes. Because it is a pre-bill payment.

Question 10

Why is it important to distinguish client money from office money?

Answer 10

To comply with SRA Accounts Rules, maintain proper segregation of funds, and avoid regulatory breaches or misuse of client funds.

Question 11

What happens if a solicitor receives £1,000 for fees but has not yet delivered a bill?

Answer 11

The money is client money until the bill is issued.

Question 12

If a solicitor is holding funds as a trustee under a power of attorney, how are those funds classified?

Answer 12

Client money under Rule 2.1.

Question 13

Is VAT included in the classification of business money after a bill?

Answer 13

Yes. VAT paid on billed fees is office money, though it must be later paid to HMRC.