The SRA has been given the go ahead by the Legal Services Board (LSB) to increase the compensation fund contribution for 2024/25 by 270%. This decision has been made partly to cover the costs of the Axiom Ince intervention.
In addition to the increased contributions, the LSB has agreed to provide the SRA with a £10m banking facility to support the fund. The intervention costs of Axiom Ince and other interventions has increased pressure on the fund. In 2022/23 the SRA paid out £41.1m in grants, up from £15m the previous year.
The compensation fund is to reimburse clients who have lost money through solicitor misconduct, resulting in SRA intervention.
In a decision notice, the LSB has approved the SRA’s request to increase contributions on 27th September despite giving themselves until November to make the decision.
The timing of the approval is somewhat controversial as the LSB is currently investigating the SRA’s handling of Axiom Ince’s collapse and is due to report soon, after a review earlier this year. Despite the review, the LSB said the changes “do not meet the conditions for refusal” and set out its reasoning.
What does this mean for solicitors?
The total contribution for 2024/25 is £31.6m, up from £10m in 2023/24. This means solicitors will pay £90 individually, up from £30 last year, and firms will pay £2,220, up from £660. One of the most contentious points is the apportionment of the contributions, as law firms of all sizes will pay the same flat fee. Smaller law firms have complained about this and the LSB has acknowledged this in its decision notice. The board has asked the SRA to review whether the current system is fair to law firms of all sizes.
How can we help?
Hawsons is one of the few accountancy practices with a dedicated team of solicitor accountants specialising in the needs of solicitors and legal professionals.
We act for a large number of law firms across all three of our offices and offer a wide range of services which are tailored to meet their individual needs. Our legal client base consists of a multitude of firms of varying structure and size, from sole traders to limited companies and LLPs with corporate members.
Our understanding of the unique issues that many in the sector are facing, combined with our technical experience, allows our solicitor specialists to provide you with proactive, commercial and informed accountancy and tax advice.
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