Potential Interest on Lawyers' Client Accounts scheme

Following the Ministry of Justice’s (MoJ) consultation on introducing an Interest on Lawyers' Client Accounts (ILCA) scheme earlier this year, it appears that they are looking to take forward the scheme in some form.

The proposal at consultation stage was for a levy of 75% of interest earned on general client accounts and 50% of interest earned on designated deposit accounts to be collected to fund access to justice. 

The MoJ is currently advertising a role for 'Head of Additional Funding Policy', with the role’s remit including shaping policy from primary legislation through to implementation in respect of a 'new scheme to unlock funding from interest generated on legal client accounts'. While no formal communications have been issued at this stage, this is an indication that some form of ILCA scheme could be implemented in the future.

What firms should be doing

• Considering whether interest policies need to be updated to ensure firms are not bound by terms of business to pay more than they receive.
• Assessing any potential impact of a levy on profitability and undertaking sensitivity analysis on models considering worst-case scenarios.
• Scenario planning cashflow forecasts to reflect potential reduced receipts and considering if additional funding is required; if so, start planning how this will be met.
• Review pricing models / hourly rates to ensure they fairly reflect the firm’s cost base.

While the timescales and final form of the ILCA scheme are unclear, it is important to be prepared. If you have any questions, please speak to your usual Crowe contact.