Interest policy 2019—law firms
1 Amount of interest
We will pay a fair sum of interest to clients or third parties on any client money we hold on their behalf.
2 Circumstances in which interest will not be paid
We will not pay interest:
2.1 on money we are instructed to hold outside a client account in a manner that does not attract interest, eg cash held in our safe;
2.2 where the amount of interest, calculated in accordance with this policy, is less than £[20][—on the basis that the costs associated with paying that interest are disproportionate to the amount involved];
2.3 where we come to a different arrangement, in writing, with the client or third party for whom the money is held—where we do so, we will provide sufficient information to enable the client or third party for whom the money is held to give informed consent (see ‘Contracting out’ at section 9 below);
2.4 [insert other]
3 Amount of interest
3.1 Client money can be held in a separate designated client account (SDCA) or in our general client account. An SDCA is an account for money relating to a specific client, trust or third party. Our general client account is an account in which we hold money relating to multiple clients or third parties.
3.2 Interest on money held in an SDCA
3.2.1 As a general rule, where we reasonably expect to hold money behalf of a client or third party for at least the period stated below, we will pay it into an SDCA with [insert bank name].
Amount of money held for client or third party Period money expected to be held
[£50,000] [16 weeks]
[£100,000] [8 weeks]
[£300,000] [4 weeks]
[£600,000] [2 weeks]
[£1,000,000] [1 week]
This is not a rigid rule and we may agree an alternative approach at the request of the client or third party for whom the money is held.
3.2.2 We will also use a SDCA:
(a) for money we hold as or on behalf of trustees under a trust;
(b) [on transactions in which the parties agree that some or all of the funds should be held in a separate account];
(c) [other]
3.2.3 Unless we are instructed to the contrary, we will pay [100% of the interest received on money deposited in an SDCA to the client or third party to whom we ultimately pay the money on deposit. OR interest at [state what rate you will use] to the client or third party to whom we ultimately pay the money on deposit. [The interest rate is likely to change from time to time[ and current rates can be found on our website at [insert website] and will be updated as required].]] Where the money on deposit is divided between more than one client or third party, we will divide the interest in the same proportions.
3.3 Interest on money held in general client account
3.3.1 Any client money not held in a SDCA will be held in our general client account, unless:
(a) doing so would conflict with our obligations as a trustee of a trust, donee of a power of attorney, Court of Protection deputy, trustee of an occupational pension scheme, etc;
(b) the client money represents payments received from the Legal Aid Agency for our costs; or
(c) we agree an alternative arrangement in writing with the client or third party for whom the money is held.
3.3.2 We will pay interest on money held in our general client account at [state what rate you will use, eg the rate available from [insert bank name] on an instant access savings account for the average balance that was held for the client in question OR the rate available from [insert bank name] on an instant access savings account calculated on a daily basis OR x% above/below OR below Bank of England base rate]. The interest rate is likely to change from time to time.
3.4 Interest period
3.4.1 Interest will be calculated over the whole period we hold the monies, starting from the date the monies are treated by us as cleared funds.
3.4.2 Unless we are notified by our bank to the contrary, we will treat monies as cleared funds in accordance with the table shown below:
Method of payment When are monies treated as cleared funds
Cheque [Three] working days after the money has been paid into our client account
Debit or credit card Date of actual receipt into the account
Direct transfer The following working day
3.4.3 We will apply the same time periods when calculating the date that monies are received by the client or third party for whom the money is held.
3.5 Best available rate
3.5.1 We are required by the Solicitors Regulation Authority (SRA) to ensure client money is available on demand, unless we agree an alternative arrangement in writing with the client or third party for whom the money is held. We therefore hold client money in instant access accounts only, unless we have agreed an alternative arrangement.
3.5.2 This means the interest rate paid on client money held in an SDCA or in our general client account may not be as high as could be achieved if the client or third party for whom the money is held placed the money on deposit themselves.
4 Tax liability
Interest on money held in our general client account or in a separate designated deposit account will be paid before deduction of tax. It will be the recipient’s responsibility to declare interest received to HMRC.
5 Monies held on more than one matter
Where we hold money on more than one matter for a client or third party, interest will be calculated separately for each individual instruction—unless it is fair to aggregate the interest.
6 Interest payment dates
Interest will be paid at the conclusion of the matter or on a [quarterly OR monthly OR annual] basis if money are held for longer than [three months OR six months OR 12 months].
7 Special cases
7.1 If we hold money jointly with a client, the interest earned will belong to the [client OR firm], unless we agree otherwise.
7.2 If we hold money jointly with another firm, we will agree with the other firm how interest will be allocated.
7.3 [Insert any other]
8 Unpresented cheques
Where we pay money by cheque to a client or third party who delays in paying the cheque into their bank, we will pay additional interest only where it is fair in all the circumstances to do so.[ We reserve the right to charge for the additional work involved.]
9 Contracting out
9.1 We may, by written agreement with the client or third party for whom the money is held, contract out of the terms of this interest policy.
9.2 When agreeing to contract out, we will:
9.2.1 act fairly and in the best interests of any relevant client; and
9.2.2 provide sufficient information to enable the client or third party for whom the money is held to give informed consent.
10 Monitoring and review
10.1 The firm’s compliance officer for finance and administration (COFA) is responsible for this policy.
10.2 The COFA will monitor compliance with this policy and will review this policy regularly—at least annually.