Residual balances 2019—law firms

The following Practice Compliance practice note provides comprehensive and up to date legal information covering:

  • Residual balances 2019—law firms
  • What is a residual balance?
  • Definition of client money
  • SRA Accounts Rules 2019
  • Promptly returning client money
  • Dealing with residual balances that cannot be returned
  • Residual balances of £500 or less
  • Reasonable steps
  • Record keeping
  • Residual balances over £500
  • More...

Residual balances 2019—law firms

This Practice Note sets out the requirements of the SRA Accounts Rules 2019, in force from 25 November 2019, regarding residual balances. It also reflects the SRA’s mandatory Statement on the prescribed circumstances in which you can withdraw client money from client account to pay to a charity of your choice.

The Accounts Rules 2019 are much more concise than the Accounts Rules 2011, comprising just over six pages of rules plus a three-page glossary. The requirements regarding residual balances are much shorter than the 2011 Rules but are supplemented by the SRA’s mandatory statement on the circumstances in which firms can pay residual client account balances of £500 or less to charity.

What is a residual balance?

Firms will often hold money on behalf of clients and, usually, client money will be used in the process of carrying out the matter or returned to the client.

However, this is not always the case and sometimes there will be money left over in circumstances where the client has become untraceable or where it has not been possible to return the money to the client. This is a residual balance.

Residual balances can arise for a number of reasons, including:

  1. balances inherited on a merger with another firm

  2. client (in)action, eg cheques that have been sent to the rightful owner but never cashed by them, clients who

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