This guide is written for solicitors, trainees and law students in England and Wales.
An SRA accountants’ report is an annual report on a firm’s client account, prepared by a reporting accountant. Since 2014 firms have only had to send the SRA a qualified report. Rule changes now with the Legal Services Board would require every firm holding client money to file one. A fixed penalty would apply for filing late.
Who is this checklist for?
COLPs, COFAs and finance partners in firms that hold client money.
It also matters to firms that think they are exempt. The proposals change what exemption means in practice. A firm relying on one today simply files nothing. Under the new rules it would have to declare its exemption status formally.
Nothing here is in force. The rules sit with the Legal Services Board and approval is not automatic. Treat this as preparation rather than compliance.
What is actually changing?
Three things, submitted to the LSB on 2 June 2026.
First, every firm holding client money files an annual accountants’ report, plus a declaration providing further information. Reporting accountants would submit reports directly to the SRA.
Second, firms relying on an exemption must state their exemption status rather than simply not filing.
Third, fixed financial penalties extend to late or missing submissions. That is the shift to register. A filing failure stops being a conversation with the regulator and becomes a set penalty.
A separate rule travels with them. Some people can make significant decisions about how a firm is run on their own. They could no longer hold the COLP or COFA role. That applies to firms with turnover above £600,000, which captured 3,525 firms in 2024-25, close to 40% of the total. Sole owner-manager firms get a partial exemption where the split is not practicable.
How does this compare with the current position?
| Requirement | Now | Proposed |
|---|---|---|
| Obtaining a report | Required for non-exempt firms holding client money | Unchanged |
| Filing with the SRA | Only if the report is qualified | Every report, every year |
| Who files | The firm | The reporting accountant, directly |
| Supporting declaration | None | Required alongside the report |
| If exempt | File nothing | Declare exemption status |
| Late or missing filing | Handled case by case | Fixed financial penalty |
| COLP and COFA eligibility | No restriction on significant decision makers | Restricted above £600,000 turnover |
| Exemption thresholds | As set | Unchanged |
Why is the SRA doing this?
A spot-check gave it the numbers. Of 596 firms surveyed, 25 non-exempt firms had not obtained a report for their last reporting period. A further 31 filed late. That is roughly one firm in ten falling short of a long-standing rule.
The regulator also points to firm failures. It names PM Law and Axiom Ince as cases that exposed how little it could see of risk building inside firms.
The Law Society supported restoring annual reports, calling annual accounts a key indicator of risk to client money. It pressed the SRA on whether it has the resource to triage what will now arrive.
The exemption declaration is the trap. A firm that has quietly relied on an exemption for years has never had to evidence it to anyone. Under the new rules it will have to state its status formally, which means checking the basis holds. That is a job worth doing before the rules land rather than after.
The checklist
1. Confirm whether the firm holds client money at all. Some firms have moved to third-party managed accounts and no longer do. If that applies, record it, because the answer drives everything else.
2. Identify the exemption relied on, if any. Write down which one and why it applies. If nobody in the firm can state it in a sentence, that is the finding.
3. Test whether the exemption still holds. Thresholds turn on client money movements over the accounting period. A firm that has grown may have drifted out of exemption without noticing.
4. Speak to the reporting accountant. Under the proposals they file directly. Confirm they know that, and agree who chases whom if a deadline approaches.
5. Map filing deadlines against the accounting period. Firms with September deadlines have the shortest runway if the rules commence early in 2027.
6. Check COLP and COFA eligibility. If turnover exceeds £600,000, list everyone who can make significant unilateral decisions about how the firm is run. Compare that list against who currently holds the two roles.
7. Plan for a partial exemption if the firm is a sole owner-manager practice. The split is not required where it is not practicable, but the position should be recorded.
8. Review the record-keeping behind both. Fixed penalties reward firms that can show a date and a document. They punish firms that cannot.
9. Respond to the open consultation. The notification requirements consultation closes on 17 August 2026.
What is the 17 August consultation about?
Notification duties, not reports. It opened on 18 June 2026 as part of the Consumer Protection Review.
The SRA wants earlier sight of mergers, acquisitions and other changes to a firm’s profile. Its argument is that spotting patterns across the market would have flagged the recent failures sooner. It is also asking whether senior people should carry clearer personal responsibility for protecting client money.
A larger question sits behind it. The SRA’s draft 2026-27 business plan asks a blunt question. Does solicitors holding client money still give the right protection for the long term? Compliance officers responding in August should read that as the real agenda.
How does this sit with the AML supervision transfer?
Badly, if a firm treats them as two separate projects.
Two regulatory changes are running at once. Client money oversight is tightening under the SRA. AML supervision is moving from the SRA to the FCA under the Financial Services and Markets Bill.
Both turn on the same underlying question: who actually controls this firm.
The COLP and COFA restriction requires a firm above £600,000 turnover to identify everyone who can make significant decisions on their own. The FCA’s fit and proper test will require a list of beneficial owners, officers and managers. Those are close to the same exercise.
Do it once. Build a single ownership and control map, keep it current, and use it for both. A firm that produces two versions in two different formats will end up defending the difference.
Common mistakes
Treating the rules as in force. They are with the LSB, which refused to approve the SRA’s complaints-handling rules in January 2026. Approval cannot be assumed.
Assuming exemption means no obligation. Under the proposals it means a different obligation.
Leaving the accountant conversation until filing season. Direct submission changes their workflow as well as the firm’s.
Reading the COLP and COFA rule as being about size. It is about who controls the firm. A small firm above the turnover threshold with one dominant owner is squarely in scope.
Waiting for approval before checking anything. Every item on the checklist above is worth doing regardless of what the LSB decides.
Official sources
The SRA has published its announcement on strengthened client money safeguards and the notification requirements consultation. The underlying papers sit on the client money consultation page.
The Legal Brief reported the package in its news piece on the client money rules. It covered the regulator’s wider posture in its report on the FCA and SRA claims management review.
Last updated: 1 August 2026. These rules are not in force. This page will be revised when the Legal Services Board decides.