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Solicitors accounts
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  • August 26, 2024
  • 9
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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Solicitors accounts
17.1(b)

VAT - ANSWER VAT is chargeable on the supply of services including searches at the point of
supply i.e. when you send the bill to the client. Not before!

VAT and lender's costs - ANSWER No separate ledger for the lender:

the profit costs and VAT for both the borrower and the lender will be recorded in the borrower's
office ledger.



Where there is a separate ledger for the lender:

the profit costs and VAT for each client are recorded in their respective office ledgers. The lender's
costs are then transferred to the borrower's office ledger in the usual way.

VAT exempt disbursements - ANSWER Litigation

court fees

damages Property stamp duty land tax

certain search fees e.g. the fees for a Local Authority Search/Central Land Charges Registry/Land
Registry Search fees for other applications made to the Land Registry e.g. to register a purchase

VAT shown on the invoice - ANSWER DR office ledger with the VAT payable on the profit costs

CR VAT account with the VAT

1.1 - ANSWER Overarching objective: keep client money safe

1.2(a) - ANSWER Must keep client money separate from office money by using separate client
account

13.2

12.8 - ANSWER Money held or received on behalf of the principal is office money

12.8(a) - ANSWER If partner buying using mortgage and firm instructed by mortgage lender then
client account

12.8(b) - ANSWER If partner buying jointly with spouse then client account

12.8(c) - ANSWER If partner acting for employee then client account

13.2 client account - ANSWER Bank account for client money

14.1 - ANSWER Client money must be paid into client account

14.2 - ANSWER rare occurrence when put office money into client account e.g. Money paid in
error out of client account

14.5 - ANSWER Client money received and paid into client account must relate to the work the
solicitor is carrying out for the client

20 - ANSWER When you can pay money out of the client account:

, Solicitors accounts
1. Required for payment to or on behalf of the client

2. Disbursements

3. To reimburse the solicitor

4. Transferring money between ledgers

5. Money drawn on clients instructions in writing

6. To pay solicitors bill of costs

7. Mixed money rule

29 - ANSWER Every solicitor must keep properly written up accounts

29. 2(b) client ledger - ANSWER Separate ledger for each individual client recording how
much money the solicitor holds on behalf of that particular client

29.4 Office ledger - ANSWER Separate ledger for each client recording how much money that
client owes the solicitor

31 - ANSWER SRA monitors and investigates solicitor compliance with the riles

32-45 - ANSWER Accountants must do reports

3rd party payments - solicitor acting as agent - ANSWER 1. the solicitor should not account for the
VAT separately, only for the gross (VAT-inclusive) amount of the payment; and

2. the payment should be made out of client money where possible

3rd party payments - solicitor acting as principal e.g. - ANSWER Payment of the accountant's
invoice by the solicitor:

DR office ledger with the net amount

CR office cash

+

DR VAT account with the VAT

CR office cash



Then Solicitor invoices the client for the accountant's costs when send bill:

DR office ledger with the profit costs

CR profit costs

+

DR office ledger with VAT

CR VAT account

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