Why the SRA’s changes to the Solicitors Accounts Rules overhaul matters for law firms in Liverpool and Manchester

The Solicitors Regulation Authority is in the middle of the biggest change to how it monitors client money since the current Accounts Rules were introduced in 2019.

For law firms across Liverpool, Manchester and the wider North West that hold client money, the practical effect is straightforward: the accountant’s report you commission each year is about to carry a lot more weight, and it’s going to be scrutinised by the SRA directly rather than filed and largely forgotten. Licensed conveyancers and other CLC-regulated firms face a parallel obligation under a different rulebook – covered further down.

What’s actually changing

The SRA opened a consultation in late 2025, building on proposals it first floated in November 2024, aimed at closing gaps in how it identifies firms putting client money at risk. Two changes stand out.

First, every accountant’s report will need to go to the SRA – not just the qualified ones. Under the current rules, only “qualified” reports (those flagging a breach or risk) have to be submitted; clean reports can sit in the firm’s own records. ICAEW’s coverage of the consultation confirms that going forward, all reports will need to be submitted, and -significantly – submitted by the reporting accountant directly to the SRA, rather than left to the firm to pass on. Each qualified report will also need to carry a formal declaration from the accountant confirming the work was carried out as required.

Second, the SRA is tightening who can hold a compliance role. Legal Futures reported that sole owners will generally no longer be permitted to hold compliance roles within their own firm – a direct response to concerns that self-certification leaves too much room for problems to go unreported until it’s too late.

The trigger for all this is well documented: a run of high-profile law firm insolvencies that put client money at risk, which is what prompted the original consultation. According to compliance consultancy Enderley Consulting’s summary of the consultation outcome, the overhaul is scheduled to take effect from early 2027, giving firms a realistic but not generous window to get their house in order.

Why this changes the calculus on your reporting accountant

Under the current regime, a firm with clean records and a compliant accountant’s report has relatively little contact with the SRA about it – the report simply confirms there’s nothing to report. That changes once every report, qualified or not, goes directly to the regulator. A report that’s thorough, well-evidenced and produced by an accountant who understands exactly what the SRA is looking for stops being a background compliance task and becomes something closer to a formal submission with your name attached.

That matters because the standard for what counts as an accountant’s report hasn’t moved: it’s still an independent examination of a firm’s compliance with the SRA Accounts Rules, covering client and office money separation, reconciliations carried out at least every five weeks, and the general soundness of the firm’s accounting systems. What’s changing is what happens to the report once it’s produced, and how closely the SRA is likely to read it.

When is a law firm exempt from needing an accountants report?

The exemption thresholds themselves remain narrow. Under Rule 12.2, firms are only exempt from needing an accountant’s report if all client money comes from the Legal Aid Agency, or if the average balance on the client account stays below £10,000 and the maximum balance never exceeds £250,000 across the accounting period – thresholds most firms handling conveyancing, probate or litigation client funds will exceed comfortably.

If you’re CLC-regulated rather than SRA-regulated

Not every conveyancing practice in the North West is SRA-authorised. Licensed conveyancers and CLC-regulated firms sit under a parallel but separate regime – the CLC Accounts Code – and the obligation looks broadly similar on paper: any CLC practice that has held or received client money during its accounting period must deliver an Accountant’s Report to the CLC within six months of the period end, prepared by a reporting accountant who meets the eligibility criteria set out in the Code, as confirmed in the CLC’s own guidance.

The areas a reporting accountant has to test are also familiar territory for anyone who’s been through an SRA report – client account integrity, reconciliations, and the handling of completion monies and disbursements — but the CLC’s own compliance guidance puts particular emphasis on residual and aged balances, and on demonstrating that reconciliations and authorisation controls are genuinely embedded day to day rather than assembled for the report, per PDA Legal’s 2026 compliance checklist. The CLC generally requires its own written authority before an aged balance of £50 or more can be released, which is a level of granularity firms coming from a general accountancy background sometimes underestimate.

Where a firm has fallen behind i.e. a report that’s overdue, or a CLC dialogue that’s already open, the priority is usually narrower and more urgent than a standard year-end job: closing out the specific report and getting the practice back into good standing, working from whatever case management and cashiering setup the firm already has (LEAP and Xero alongside outsourced cashiering providers are common across conveyancing practices) rather than asking the firm to change systems mid-engagement.

What this means in practice for law firms across the North West

For most firms that already commission an accountant’s report each year, the immediate obligation doesn’t change: you still need a qualified reporting accountant – someone who’s both a member of a recognised body such as ICAEW or ACCA and a registered auditor, or who works within a registered audit practice – to examine your accounts within six months of your accounting period end. What’s worth doing now, ahead of the 2027 changes landing, is reviewing:

• Who currently holds your firm’s compliance role, and whether that arrangement will still be workable once sole-owner restrictions apply.
• How your reporting accountant handles a qualified finding. With every report going to the SRA directly, the quality of the narrative around any qualification – what was found, what’s been fixed, and the evidence for it – matters more than it used to.
• Whether your reconciliation and record-keeping processes would hold up to closer scrutiny. A report that’s clean because the underlying records are genuinely sound is a very different position to be in than one that’s clean because a problem wasn’t picked up.

A second front: ECCTA and your firm’s own Companies House filings

The SRA isn’t the only body raising the bar this year. Many law firms – particularly those handling company formations, share transactions or acting for corporate clients – file at Companies House on their clients’ behalf, which brings them into the Economic Crime and Corporate Transparency Act 2023 (ECCTA) regime as well.

Firms that verify client identities and submit filings need to be registered as Authorised Corporate Service Providers (ACSPs), and on 11 August 2026 Companies House published new “fit and proper” guidance under section 1098B of the Companies Act 2006 setting out exactly what it will look at when deciding whether a firm can register – or keep – that status. It’s not a one-off approval: Companies House monitors ACSPs on an ongoing basis and had already suspended 74 and ceased a further 56 by 31 March 2026. Criminal, regulatory and financial history, honesty and conduct, and the quality of a firm’s identity verification and filing controls are all explicitly in scope.

Companies House’s revised transition plan (published 5 August 2026) has pushed the date from which identity verification will be compulsory for anyone filing on a company’s behalf back to no earlier than November 2027. But identity verification for directors and PSCs is already live – compulsory for new appointments since 18 November 2025, with existing directors and PSCs required to complete verification by November 2026.

Taken together with the SRA’s own accounts rules overhaul, the direction is consistent: two separate regulators are both moving from periodic, largely self-certified compliance toward ongoing, actively monitored oversight – one over how you hold client money, the other over how you verify and file for your corporate clients.

Local context – how this affects North West legal practices

Liverpool and Manchester have a substantial concentration of independent and mid-sized law firms and licensed conveyancing practices, many of which hold client money as a routine part of conveyancing, private client and litigation work –  areas the SRA has flagged as highest-risk in the run-up to this consultation. Firms across the city centres and surrounding areas – Wirral, Stockport, Warrington, Bolton and Wigan among them – that get ahead of the changes, rather than treating the accountant’s report as an annual formality, will be in a considerably stronger position whether it’s the SRA reading every report that lands on its desk, or the CLC following up on an open compliance dialogue.