# Do we need an accountant's report this year? Six questions for a small law firm > Six questions on client money, Legal Aid, the £10,000 average, the £250,000 maximum and the SRA, ending in whether to obtain a report, deliver it or neither. - Page to cite: https://aeolookup.com/solicitors/do-we-need-accountants-report-this-year-law-firm-six-questions/ - Publisher: AEO Lookup (https://aeolookup.com/) - Section: Solicitors, SRA, AML and transparency - Published 2 October 2026 - Key fact: We wrote this questionnaire of 6 questions and 8 outcomes from the rules set out in 3 of our guides and the sources each outcome names. Of the 22 routes through the six questions, 11 end at the SRA notice outcome, because a notice under rule 12.4 overrides every exemption. Only two routes reach the £10,000 and £250,000 exemption, and both need the average sum done first. - Sources: SRA Accounts Rules, rules 12.4, 12.5 and 12.8, on sra.org.uk, read 2 October 2026.; SRA Accounts Rules, rule 12.1, on sra.org.uk, read 2 October 2026.; SRA Accounts Rules, rules 2.1(d) and 2.2, on sra.org.uk, read 2 October 2026.; SRA Accounts Rules, rule 12.2(a), on sra.org.uk, read 2 October 2026.; SRA Accounts Rules, rules 8.3, 12.2 and 12.3, on sra.org.uk, read 2 October 2026; SRA guidance, Planning for and completing an accountant's report (updated 14 September 2020), read 2 October 2026; the averaging method from the SRA's exemption guidance as set out in our guide.; SRA Accounts Rules, rules 12.2, 12.4 and 13.1, on sra.org.uk, read 2 October 2026.; SRA Accounts Rules, rules 3.3 and 12.1, on sra.org.uk; SRA guidance, Planning for and completing an accountant's report (updated 14 September 2020); both read 2 October 2026.; SRA Accounts Rules, rules 12.1, 12.2, 12.5, 12.8 and 12.9, on sra.org.uk, read 2 October 2026.; each outcome names its source, and the linked guide shows the working. For the COFA, partner or practice manager of a small firm who needs to know, at the end of an accounting period, whether rule 12 of the SRA Accounts Rules requires an accountant's report. It asks what client money the firm held, whether it all came from the Legal Aid Agency, how the reconciliation balances compare with the £10,000 average and £250,000 maximum, what the accountant expects to report and whether the SRA has given notice. It gives one outcome with the rule and the six-month deadline. We read the rules on sra.org.uk on 2 October 2026. Nothing you choose leaves the page. **Free tool on the page:** Accountant's report: obtain, deliver or exempt. It runs in the browser at https://aeolookup.com/solicitors/do-we-need-accountants-report-this-year-law-firm-six-questions/#tool and asks for no sign-up. ## The questions, and why each is asked **1. In the accounting period, did the firm hold or receive any client money?** Rule 12.1 applies to a firm that held or received client money, or operated a joint account or a client's own account as signatory, at any time in the period. Rule 2.2 takes some fee money outside rule 12. **2. Did all of the client money held or received in the period come from the Legal Aid Agency?** Rule 12.2(a) removes the duty to obtain a report where all the client money held or received in the period was money received from the Legal Aid Agency. This question appears only when an earlier answer makes it relevant. **3. Taking the balance at every reconciliation in the period, is the average £10,000 or less?** Rule 12.2(b) exempts a firm whose client money balance did not exceed an average of £10,000. Rule 12.3 counts all client accounts plus joint and clients' own accounts the firm operates, from the statements. This question appears only when an earlier answer makes it relevant. **4. Was any single reconciliation balance in the period above £250,000?** The exemption in rule 12.2(b) also needs a maximum of £250,000 or less. With 25 or fewer reconciliations in the period, an average of £10,000 or less means the maximum cannot be above £250,000. This question appears only when an earlier answer makes it relevant. **5. Has the reporting accountant said the report will be qualified, with client money placed at risk?** Rule 12.1(b) requires delivery to the SRA only where the report is qualified to show a breach such that money belonging to clients or third parties is, has been or is likely to be placed at risk. This question appears only when an earlier answer makes it relevant. **6. Has the SRA given the firm notice to obtain or deliver an accountant's report?** Rule 12.4 lets the SRA require a report on reasonable notice where the firm stops operating as an authorised body and holding a client account, or where it considers it in the public interest. ## Every outcome, and the rule behind it ### The SRA has given notice: obtain the report, and deliver it as the notice says Reached when: "Has the SRA given the firm notice to obtain or deliver an accountant's report?" answered "Yes, we have a notice from the SRA". Rule 12.4 of the SRA Accounts Rules lets the SRA require a firm to obtain or deliver an accountant's report on reasonable notice, where the firm ceases to operate as an authorised body and to hold or operate a client account, or where the SRA considers it otherwise in the public interest. A notice applies whatever the £10,000 average and £250,000 maximum show and whether or not the money came from the Legal Aid Agency. The notice sets what is required. - Diarise the date in the notice and engage an accountant who is a chartered body member and a registered auditor (rule 12.5). - Give the accountant details of every account held or operated in the period (rule 12.8). - Deliver the report to the SRA if the notice requires delivery, whether or not it is qualified. Source: SRA Accounts Rules, rules 12.4, 12.5 and 12.8, on sra.org.uk, read 2 October 2026. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### No client money in the period: no accountant's report is required Reached when: "In the accounting period, did the firm hold or receive any client money?" answered "No client money at all". Rule 12.1 of the SRA Accounts Rules applies only to a firm that, at some time in the accounting period, held or received client money or operated a joint account or a client's own account as signatory. A firm that did none of these has no duty to obtain an accountant's report for that period. The test is for each accounting period, so one completion, estate or payment on account in the next period brings rule 12 back. - Note on file that no client money was held or received in the period, with the period's dates. - Check the bank statements for the whole period, including any joint or clients' own accounts, before relying on this. Source: SRA Accounts Rules, rule 12.1, on sra.org.uk, read 2 October 2026. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### Fees and disbursements held outside client account under rule 2.2: rule 12 does not apply Reached when: "In the accounting period, did the firm hold or receive any client money?" answered "Only fees and our own disbursements, held outside client account". Rule 2.2 of the SRA Accounts Rules lets a firm whose only client money is payments on account of its fees and of disbursements it is liable for, and which keeps no client account for any other reason, hold that money outside a client account if it told the client in advance where and how it would be held. Rule 2.2 says rule 12 does not apply to money held this way, so no accountant's report is required for it. Any other client money ends the arrangement. - Keep the advance notice to each client saying where and how the money is held. - Check that every disbursement held is one the firm is itself liable for. - Run the questions again if the firm opens a client account or receives any other client money. Source: SRA Accounts Rules, rules 2.1(d) and 2.2, on sra.org.uk, read 2 October 2026. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### All the client money came from the Legal Aid Agency: exempt under rule 12.2(a) Reached when: "Did all of the client money held or received in the period come from the Legal Aid Agency?" answered "Yes, all of it". Rule 12.2(a) of the SRA Accounts Rules says a firm is not required to obtain an accountant's report for an accounting period in which all of the client money it held or received was money received from the Legal Aid Agency. The exemption is all or nothing: a single payment on account from a client, or money from any other source, takes the firm to the £10,000 average and £250,000 maximum test in rule 12.2(b) instead. - Keep a note for the period showing that every receipt into client account came from the Legal Aid Agency. - Re-test at the end of each accounting period, since one other receipt removes this exemption. Source: SRA Accounts Rules, rule 12.2(a), on sra.org.uk, read 2 October 2026. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### Do the average sum before deciding: add every reconciliation balance Reached when: "Taking the balance at every reconciliation in the period, is the average £10,000 or less?" answered "We have not done the sum yet". Rule 12.2(b) of the SRA Accounts Rules exempts a firm only if its client money balance did not exceed an average of £10,000 and a maximum of £250,000 in the accounting period. The SRA's guidance on the exemption, as our guide sets out, adds the balance at every reconciliation, which rule 8.3 requires at least every five weeks, and divide by the number of reconciliations. With twelve month-end reconciliations the total can be no more than £120,000 for the average to stay at £10,000. - List every reconciliation balance in the period, including joint and clients' own accounts the firm operates (rule 12.3). - Divide the total by the number of reconciliations, note the highest single balance, then run these questions again. Source: SRA Accounts Rules, rules 8.3, 12.2 and 12.3, on sra.org.uk, read 2 October 2026; SRA guidance, Planning for and completing an accountant's report (updated 14 September 2020), read 2 October 2026; the averaging method from the SRA's exemption guidance as set out in our guide. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### Average £10,000 or less and maximum £250,000 or less: exempt under rule 12.2(b) Reached when: "Taking the balance at every reconciliation in the period, is the average £10,000 or less?" answered "Yes, £10,000 or less"; "Was any single reconciliation balance in the period above £250,000?" answered "No, the highest was £250,000 or less". Rule 12.2(b) of the SRA Accounts Rules says a firm is not required to obtain an accountant's report for an accounting period in which its client money balance did not exceed an average of £10,000 and a maximum of £250,000. Both limbs are met, so no report is needed for this period. The exemption is tested afresh each period, and rule 12.4 still lets the SRA require a report on reasonable notice in the public interest. - Keep the sum, with each reconciliation balance, the average and the highest balance, signed and dated. - Keep the signed reconciliations and the accounting records for six years (rule 13.1). - Do the sum again at the end of the next period; one large completion can end the exemption. Source: SRA Accounts Rules, rules 12.2, 12.4 and 13.1, on sra.org.uk, read 2 October 2026. The working is in [Does a small law firm have to get an accountant's report? The £10,000 average and £250,000 maximum tests, worked through twelve reconciliations](https://aeolookup.com/solicitors/do-i-need-accountants-report-sra-10000-average-250000-exemption/). ### A qualified report: obtain it and deliver it to the SRA within six months Reached when: "Has the reporting accountant said the report will be qualified, with client money placed at risk?" answered "Yes, it will be qualified". Rule 12.1 of the SRA Accounts Rules requires a firm that held client money and is not exempt to obtain an accountant's report within six months of the end of the accounting period, and to deliver it to the SRA within the same six months where it is qualified to show a breach such that client or third-party money is, has been or is likely to be placed at risk. For a period ending 31 May 2026 both deadlines are 30 November 2026. Delivery is the firm's duty. - Deliver the qualified report to the SRA by the six-month date, whoever posts it. - Put right the breach the accountant found, such as client account used as a banking facility, and record what changed. Source: SRA Accounts Rules, rules 3.3 and 12.1, on sra.org.uk; SRA guidance, Planning for and completing an accountant's report (updated 14 September 2020); both read 2 October 2026. The working is in [Can a law firm hold a client's money when it is not doing legal work for them? Rule 3.3 and the banking facility ban, worked through one sale](https://aeolookup.com/solicitors/can-law-firm-hold-client-money-without-legal-work-banking-facility-rule-3-3/). ### Not exempt: obtain an accountant's report within six months of the period end Reached when: any other set of answers. Rule 12.1 of the SRA Accounts Rules requires a firm that held or received client money in the accounting period to obtain an accountant's report within six months of its end, unless rule 12.2 exempts it. Here neither exemption applies: the money did not all come from the Legal Aid Agency, and the balance exceeded the £10,000 average or the £250,000 maximum. An unqualified report is kept on file; it is delivered to the SRA only if qualified to show client money at risk. - Count six months from the last day of the period and agree a date with the accountant before then. - Use an accountant who is a chartered body member and a registered auditor, on the SRA's prescribed form (rules 12.5 and 12.9). - Give the accountant details of every account held or operated in the period, and the residual balances register if asked. Source: SRA Accounts Rules, rules 12.1, 12.2, 12.5, 12.8 and 12.9, on sra.org.uk, read 2 October 2026. The working is in [Residual client balances under the SRA Accounts Rules](https://aeolookup.com/solicitors/sra-accounts-rules-residual-client-balances-500-rule/). ## How to use the result Answer it in the month the accounting period ends, using the signed reconciliations for the whole period, and keep the outcome with them. The exemption is tested afresh for each period, so a firm exempt last year can need a report this year. If the outcome is a report, count six months from the last day of the period and engage the accountant well before then: the report is obtained by that date, and a qualified one is delivered to the SRA by the same date. The outcome applies the rule to the answers given; it cannot see the facts behind them. Where an answer is a judgement, or the facts are unusual, the outcome may not fit. A supervising solicitor reviews and signs anything a tool drafts, and this page is general information, not legal advice. Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) sets up AI assistants for solicitors: they prepare drafts for a person to approve. None of these outcomes depends on them. --- ![](https://aeolookup.com/img/d/owner-line.png) General information for UK small firms, not legal, tax or financial advice.