When do we pay interest?
We do not pay interest on:
if the amount is held as cleared funds for a period less than seven days;
if, in any one year, the interest would amount to £50.00 or less, as below that sum we consider that the administrative costs of dealing with the funds would exceed the interest due;
if the amounts held are payments by you on account of costs which have accrued but not yet been invoiced;
On money held to pay a professional disbursement, once the intended recipient has requested that we delay in paying them;
On any property-related matters, including but not limited to, funds held pending completion, mortgage advances, deposits received or sales proceeds held pending distribution (save by prior arrangement);
On money that we have paid into a client account as an advance from the firm to fund a payment on behalf of a client or trust in excess of funds held for that client or trust; and
If we have agreed with the recipient to contract out of our obligation to pay interest.
We will pay interest on all other monies held in client account, including any monies we should have held in client account but failed to do so.
Interest will be calculated and paid in accordance with this policy. The amount of interest paid to each recipient will take into account:
How long we held cleared funds;
The requirements to provide instant access to funds held in client account;
The rate payable is equivalent to what you would receive from HSBC’s Instant Access Savings Account, where we have our client account. The rate takes into account the fact that client monies have to be available on an instant access basis. These rates will be reviewed quarterly and this Policy updated as required; and
The practise of HSBC’s Client Deposit Account, where we have our client account, on how often interest is compounded.
Types of Account
Client account monies can be held in two different ways:
A general client account that holds pooled money belonging to different clients and matters. This is where most client or trust money is held. This is on an instant access basis to ensure immediate access to funds and means it is unlikely you will receive as much interest on money held as might have been obtained had you held and invested the funds yourself.
A designated client account. This account is set up specifically for an individual client or trust and will include in its title a reference to your identity. These are sometimes set up when there are specific contractual requirements to do so. This may also be arranged in appropriate cases by agreement between the client and the firm, in order to achieve a better rate of interest. We are not obliged to agree to a client request of this nature and in any event are entitled to have regard to the amount and duration of the deposit, and to the nature of the transaction. We may charge a fee for setting up a designated client account.
Application of interest for client funds held
Money held in a designated client account - we will account to you for all the interest earned on that account (net of any tax deducted at source).
Money held in a general client account (or money under our control which should have been held in a client account but was not) - we will account to you for interest when it is fair and reasonable to do so in all the circumstances having regard to the principles and practices as detailed below:
We will normally calculate and pay interest once your matter has been concluded, however there may be instances where it might be more appropriate to account for interest at intervals throughout the matter;
We reserve the right to set off any interest due to you against any amounts due to us; and
We will retain interest paid to us by the bank on the aggregate of all client money held in the general client account.
Interest will normally be paid to the client gross. It will be the recipients responsibility to declare interest received to HMRC and account for tax payable.
Interest Period
Interest will be calculated and paid by reference to applicable rates over the whole period that we hold the monies, starting from the date the monies are treated by us as cleared funds.
Unless we are notified by our bank to the contrary, we will treat monies as cleared funds in accordance with below:
Method of Payment
When are the monies treated as cleared funds
Cheque - 5 working days after the money has been paid into our client account
Direct Transfer/Same Day Payments - Date of actual receipt into the account
We will apply the same time periods when calculating the date that monies are received by the recipient.
Monies held on more than one matter
Where we hold monies on more than one matter for a recipient, interest will be calculated separately for each individual instruction. Unless it is fair and reasonable to aggregate the interest.
Special Cases
This policy does not apply when we act as liquidator, trustee in bankruptcy, Court of Protection deputy or the trustee of occupational pension scheme. We will comply with the appropriate statutory rules and any other relevant provisions of the SRA Accounts Rules 2019 regarding payment of interest.
If we hold money jointly with a client, the interest earned will belong to the client, unless we agree otherwise.
If we hold money jointly with another firm, we will agree with the other firm how interest will be allocated.
Informing clients of our Interest Policy
We will notify clients of our interest policy in our terms of business and make this policy available on our website.
Contracting Out
Contracting out usually takes the form of agreeing that we will pay no interest or a reduced amount of interest. It can also include agreeing to pay 100% of the interest received on monies held on general client account, where this exceeds the amount that would normally be paid under the policy.
We may, by written agreement with the client and/or recipient, contract out of the terms of this interest policy.
We will only contract out where doing so provides a fair outcome. This will depend on all the circumstances, eg:
The amount involved – the larger the sum of interest, the greater the onus on us to show that the client has been treated fairly;
The status and bargaining position of the client – It may be less appropriate to contract out if the client is a private individual with little legal exposure than for a commercial client where the interest represents a very modest proportion of the overall transaction; and
Whether there are specific reasons for contracting out, eg tax reasons or religious belief.
When agreeing to contract out, we will:
If you do not wish to receive interest, then you may opt-out by informing this firm’s Compliance Office for Finance and Administration (COFA) in writing and noting your matter reference number:
COFA
Manchester House
50 High St
Builth Wells
Powys
LD2 3AD
