Can a solicitor pay office bills from the client account?

Solicitors hold two types of funds: client money and office money. Client funds are held on trust for specific legal matters, while office funds belong to the firm and are used to pay business expenses. The Solicitors Regulation Authority (SRA) Accounts Rules make a clear distinction between the two.

Under these rules, solicitors cannot pay office bills from the client account, except in very limited and specific circumstances. Doing so risks breaching SRA regulations and could lead to disciplinary action.

This article explains what the SRA rules say, the difference between client and office accounts, and how to handle payments properly.

Understanding client and office accounts

Solicitors must keep client money separate from office money at all times.

Client account:
This is a designated bank account where solicitors hold money belonging to clients or third parties. Examples include:

• House sale proceeds.

• Money on account for disbursements or future legal fees.

• Settlement funds held pending completion.

Office account:
This is the firm’s own bank account, used to pay:

• Staff salaries and office rent.

• Supplier invoices.

• Professional fees and tax.

• Operating costs of the practice.

The SRA rules require solicitors to maintain a strict separation between these accounts to prevent misuse of client funds.

What the SRA Accounts Rules say

The SRA Accounts Rules 2019 govern how solicitors must handle money received in connection with their work.

Rule 4.1 states that a firm must keep client money separate from money belonging to the firm. Rule 5.1 prohibits the use of client money for the firm’s own purposes.

This means that office expenses such as rent, staff wages, utilities, and supplier invoices must never be paid directly from the client account. These costs must be paid from the office account using the firm’s own funds.

If a solicitor pays office bills directly from the client account, they are effectively using client money for personal or business gain, which breaches the rules and undermines client trust.

The only exceptions

There are a few limited cases where transfers between the client and office accounts are permitted:

1. Payment of the solicitor’s bill:
   Once the firm has raised a bill to the client for work done or disbursements incurred, it can transfer the corresponding amount from the client account to the office account. This transfer must reflect the specific amount billed and be properly recorded.

2. Reimbursement of disbursements:
   If the firm pays disbursements such as court fees or Land Registry charges from the office account, it can later reimburse itself from the client account after raising an appropriate bill or note of costs.

3. Client consent or authorised payment:
   In rare circumstances, if a client expressly agrees in writing that certain costs may be paid directly from their funds, the firm may do so—provided it complies with the SRA’s transparency and record-keeping requirements.

Outside these exceptions, paying office or operational bills from the client account is strictly prohibited.

Risks of using client money for office expenses

Mixing client and office funds can have serious consequences for a solicitor and their firm. The main risks include:

• Breach of SRA rules: The SRA treats misuse of client money as a serious regulatory breach, which may result in investigation or disciplinary action.

• Loss of client trust: Clients expect their funds to be protected and used only for their legal matter. Any misuse can damage the firm’s reputation.

• Audit and reporting issues: During an SRA audit or accountants’ report, irregular payments from the client account can trigger compliance failures.

• Financial sanctions: Firms may be required to repay funds immediately and could face fines or suspension.

In extreme cases, misuse of client money can amount to professional misconduct, potentially leading to the solicitor being struck off.

How to handle payments correctly

To stay compliant, solicitors should follow these steps when dealing with office and client funds:

1. Pay all office expenses from the office account. This includes staff wages, utilities, and business suppliers.

2. Raise bills promptly for work done or disbursements incurred, and then transfer the exact billed amount from the client account to the office account.

3. Keep clear accounting records showing every movement between accounts. Each entry should specify the client name, matter reference, and reason for the transfer.

4. Perform regular reconciliations of client and office accounts, ideally monthly, to ensure that balances match and no client funds are used incorrectly.

5. Maintain good communication with clients about billing, disbursements, and when funds will be transferred.

The role of the COFA

Every regulated law firm must appoint a Compliance Officer for Finance and Administration (COFA). The COFA’s role is to ensure that the firm complies with the SRA Accounts Rules and maintains proper systems and controls for handling client money.

The COFA should regularly review client account activity, authorise transfers to the office account, and investigate any irregular transactions. They are also responsible for reporting material breaches to the SRA when necessary.

Practical examples

Example 1: Paying rent from the client account
If a firm uses money held for a client to pay its office rent, even temporarily, this is a breach. The rent is an office expense and must be paid from the office account.

Example 2: Recovering unpaid fees
A solicitor completes work and raises an invoice for £2,000. The client already has £3,000 on account. The firm can transfer £2,000 from the client account to the office account to cover the bill, leaving £1,000 remaining for future disbursements.

Example 3: Paying a court fee
If the firm pays a £500 court fee from its office account, it can later reimburse this amount from the client account once the client has been invoiced for the disbursement.

Best practice for compliance

• Use separate client and office bank accounts at all times.

• Keep accurate ledgers for each client matter.

• Review and reconcile accounts regularly.

• Ensure all staff handling money understand SRA compliance requirements.

• Never use client funds to cover short-term cash flow issues.

Good financial management not only keeps firms compliant but also protects client relationships and builds long-term trust.

The bottom line

A solicitor cannot pay office bills from the client account. The SRA Accounts Rules are clear: client money must be kept entirely separate from the firm’s own funds and cannot be used for business expenses.

The only lawful transfers from client to office accounts are for settled bills or authorised disbursement reimbursements.

Maintaining this separation protects clients, ensures regulatory compliance, and upholds the integrity of the legal profession. Firms that follow strict accounting procedures and maintain transparent financial records can manage client funds confidently and avoid costly breaches.