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Interest on client accounts

In Brown¹, a solicitor, carrying on a large practice, placed clients' money on deposit and also made loans to clients. He contended that the interest received, less that paid to clients, was earned income. The House of Lords held that the interest did not belong to the solicitor and so was not earned income. Following that decision, legislation was enacted to empower the Law Society to make rules prescribing when a client should receive interest on his money.

The current rules are set out in the deposit interest provisions of the Solicitors' Accounts Rules 2018². Solicitors may either:

1. Ìý

   •ÌýÌýÌýÌý open a separate designated account for the client and account to the client for the interest earned on the account, or

2. Ìý

   •ÌýÌýÌýÌý deposit the money in a general client deposit account and account to the client for an amount equal to the interest it would have earned if it had been deposited in a separate designated account³

Separate designated accounts

A solicitor is not charged