SRA Accounts Rules 2019

The SRA has just published a statement relating to residual balances that cannot be repaid under rule 2.5. of the new 2019 SRA Accounts Rules which become effective for all firms from 25 November.

The statement can be accessed from the SRA website

The publication is a ‘mandatory statement’ which must be complied with by all SRA authorised firms and their staff. Essentially it allows firms to deal with individual client matter balances, up to £500, in the same way that they have been able to do under Rule 20.2 of the 2011 rules.

The statement written in a very reader friendly way and there are probably a few points worth highlighting:

  • residual balances only exist if the firm has failed to comply with rule 2.5 (‘old’ rule 14.3) and cannot now return the monies;
  • by that token residual balances should be relatively rare;
  • firms must not deduct out of pocket expenses incurred trying to trace the owner of the funds;
  • there is no specific requirement to choose a charity that provides an indemnity, although if that is the case the firm remains liable should the client reappear and request their money;
  • appropriate records are to be kept and you should be able to evidence the efforts you have made to return residual balances to the client as has been the case in previous versions of the rules.
  • Reporting Accountants are likely to need to review the records detailing any payments to charity as part of their work;
  • While not detailing the statement does make reference to the issues for the firm to consider when deciding what will be reasonable steps to try and trace the client and repay the funds, as well as a few suggestions on ways to trace the client: social media, Companies House or Probate Registry searches; DWP letter forwarding service, internet searches.

It is fair to say that this has not been an area where firms have excelled and is an area where we often identify breaches. Most would benefit from looking carefully at their existing polices to deal with file closure procedures and repaying funds promptly in order to avoid residual balances arising. Regular review of exception reports of files with no movement should be part of the accounting routines.

If you want any further guidance on this matter please contact any of the following:

Martin Wilmott – Doncaster Office [email protected]

Simon Bladen – Sheffield Office – [email protected]

David Owens – Northampton Office – [email protected]

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141

Martin Wilmott

Partner, Doncaster

01302 367 262
David Owens, Partner

David Owens

Partner, Northampton

01604 645 600

[email protected]