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Residual balances – rules and resolutions

With the SRA recently consulting on increasing the amount firms can donate to charity without prior authorisation under rule 20.2, Executive Council Member Jacky Ellis outlines the current rules for dealing with residual client account balances and provides some handy hints.

There has long been a requirement to account to the client for all money held on their behalf but often there is debate over whether balances held prior to 14 July 2008 need to be addressed under the current rules. The Solicitors’ Accounts (Residual Client Account Balances) Amendment Rules 2008 which came into force from 14 July 2008 sought to remove the necessity for pre authorisation from the regulator when withdrawing from client account small amounts to donate to charity. The amendment introduced self certification for balances below £50 in the event of untraceable clients (or other person on whose behalf the money is held), subject to reasonable attempts made to return the funds to the rightful owner. It also introduced the necessity to return residual balances in a "timely manner".

The amendment has since evolved into Rule 14.3 of the SRA Account Rules 2011 and with the SRA recently consulting on further changes as part of the Red Tape Initiative, we are likely to see more significant amendments by October of this year, predominantly with an increase to the self certification amount. With the majority of applications to withdraw from client account under Rule 20.1 (j) and 20.2 made to the SRA being under £250 this figure is likely to be a main consideration in the review to increase the self certification amount, currently proposed at £500.