On 2 June 2026 the SRA announced that it has submitted a package of proposed rule changes to the Legal Services Board. Subject to approval, they are expected in force early in 2027 — and the change that matters most reverses the rule most firms rely on.
Article · 15 June 2026
If your firm holds client money, the way its annual Accountant's Report reaches the SRA is about to change. On 2 June 2026 the SRA announced that it had submitted a package of proposed rule changes to the Legal Services Board for final approval. In the SRA's own words, subject to that approval the new rules are expected to come into force early in 2027. None of it is law today, and none of it binds your firm yet.
The headline is short. At the moment you only have to send the report to the SRA if it is qualified. Under the proposals, every firm that holds client money submits its report — qualified or not — and firms that are exempt have to give the SRA information about their exemption rather than simply saying nothing.
Rule 12.1 of the SRA Accounts Rules says that if you have, at any time during an accounting period, held or received client money, or operated a joint account or a client's own account as signatory, you must obtain an Accountant's Report for that period within six months of the period end — and deliver it to the SRA within those six months only if it is qualified to show a failure to comply such that money belonging to clients or third parties is, has been, or is likely to be placed at risk.
That second limb is the one doing the work. A clean report is obtained, filed in a drawer, and never seen by the regulator. Qualified reports go in through mySRA on form AR1; the email route was withdrawn in October 2020.
Rule 12.5 governs who may sign. The report must be prepared and signed by an accountant who is a member of one of the chartered accountancy bodies — ICAEW, ICAS, ACCA or ICAI — and who is, or works for, a registered auditor. Both limbs are cumulative, which is why the report is a different job from your annual accounts and your tax return. We do the accounting work all year; the report itself is prepared and signed by a registered auditor.
Three groups, and they are not the ones usually assumed.
Firms that have quietly relied on non-delivery. A report can be clean, or it can be qualified but not delivered because the accountant judged the failures did not put money at risk. In either case the SRA currently sees nothing. Under the proposals it sees the report. If your last two reports carried observations that never left the building, that changes the calculation about fixing them.
Firms at the £600,000 and £2m thresholds. Plenty of profitable firms are run by one or two people who between them hold every role — owner, managing partner, COLP and COFA. Turnover of £600,000 is a small firm by any measure, so the separation rule reaches a long way down. It is a governance change, not a paperwork change: somebody else has to be able and willing to hold one of the two roles.
Firms whose report is habitually late. Extending fixed penalties to late or non-submission converts a soft deadline into a priced one.
Take a three-partner private client and conveyancing firm with turnover of £940,000 and average client account balances of about £1.6m, peaking at £4.1m in a busy completion month. The senior partner is the owner-manager, the COLP and the COFA. The figures are illustrative, but the shape is ordinary.
On turnover alone the firm is over the £600,000 threshold, so the separation rule would apply regardless of what the client account holds. One of the two compliance roles has to move to somebody who is not the person making significant decisions about how the firm is run — and that person must be a manager or employee of the firm, must consent, and must be approved by the SRA. That is a conversation to have long before the rules are made, because approval is not instant and the obvious candidate may not want the job.
These are proposals the SRA announced on 2 June 2026 that it has submitted to the Legal Services Board, not rules in force. The LSB has to approve them, the SRA expects them in force early in 2027, and the made rules may differ from the decision announcement. Treat this as advance warning, not as your current obligations — which remain rule 12.1 as written.
The consultation that ran from December 2025 to February 2026 proposed a £500,000 client-balance trigger for the separation rule. The decision announcement of 2 June 2026 states £2m. We use £2m here because it is the later, decision-stage figure, but the gap between the two is large enough to change which firms are caught, and the made rules are the only authority that settles it. If your firm sits between those two numbers, that is the sentence to remember when the LSB publishes its decision.
This package is not the SRA's only live work on client money. A separate consultation launched on 14 November 2024 and closed on 21 February 2025 asked the broader question of whether solicitors should hold client money at all, or move to third party managed accounts, along with hard timeframes for returning residual balances and restrictions on retaining interest. No decisions have been taken and no implementation dates exist. A further consultation launched on 19 June 2026 and closing on 17 August 2026 proposes requiring firms to notify the SRA when they merge with or acquire another firm, and when they start holding or receiving client money.
The direction is consistent: more visibility, sooner, and less discretion about what the regulator gets told. A firm whose client account records are already clean will find all of this dull. A firm whose records are held together by one person's memory will not.
If you want the underlying mechanics rather than the news, start with our guide to the SRA Accounts Rules and our guide to the Accountant's Report. If you would rather see where your own firm stands, the client account health check takes about ten minutes. COFA support and our Accountant's Report service explain what we do around the report itself.
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Only if it is qualified. Rule 12.1 requires you to obtain the report within six months of your accounting period end, and to deliver it to the SRA within those six months only where it is qualified to show a failure to comply such that client or third party money is, has been, or is likely to be placed at risk. A clean report is obtained and kept, not filed. That is the position the SRA announced on 2 June 2026 that it has asked the Legal Services Board to reverse, so that every firm holding client money submits its report. Until the LSB approves those rules and they come into force, rule 12.1 as currently written is what binds your firm.
No date has been fixed. The SRA announced on 2 June 2026 that it has submitted the proposals to the Legal Services Board, and said that, subject to approval, the new rules are expected to come into force early in 2027. That is the SRA's expectation rather than a commencement date, and the LSB approval stage sits between the announcement and any in-force date. It is also worth noting that the made rules can differ from a decision announcement, which is why the £500,000 figure in the consultation and the £2m figure in the June decision have to be reconciled against the final text. Plan for the change, but do not treat it as current law.
Today, yes. The Authorisation of Firms Rules require an authorised body to have an approved COLP and an approved COFA at all times, and one individual can hold both roles provided they are a manager or employee, consent, are not disqualified, and, for the COLP, are authorised to carry on reserved legal activities. The June 2026 proposals would change that at firms with turnover over £600,000 or holding more than £2m of client money, where someone who can make significant decisions about how the firm is run could not hold both roles. A partial exemption is proposed for smaller sole owner-manager firms. Approval takes time, so identify a candidate early.
That is broadly the intention, and the SRA has said so openly. The proposal is that reporting accountants submit reports directly to the SRA with a copy to the firm's COFA, because it reinforces the independence of the accountant and reduces the risk that a firm delays or otherwise interferes with the report. In practice the firm still sees the findings and still has the chance to correct problems before the report is written, which is where the work actually is. What disappears is the gap between the accountant finishing the report and the regulator learning what it says. Fixing issues during the year, rather than afterwards, becomes the only useful strategy.
No, and we say so plainly. Rule 12.5 requires the report to be prepared and signed by an accountant who is a member of ICAEW, ICAS, ACCA or ICAI and who is, or works for, a registered auditor. Both conditions have to be met together. We are an AAT-licensed practice and a member of the ICPA, which satisfies neither limb, so we do not sign reports and we are not a registered auditor. What we do is everything around it: the client account bookkeeping, the five-weekly three-way reconciliations, the records the accountant will ask for, and the annual accounts and tax. The report itself is prepared and signed by a registered auditor we work with.
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