BIM65801 - Measuring the profits (particular trades): solicitors: bank interest received - chargeability

Bank interest received and retainable by a solicitor on the investment of clients' or his own business moneys should normally be assessed under ITTOIA05/S369.

Interest on money subject to a trust of which the solicitor is a trustee is separately chargeable (see TSEM3036).

As regards assessment procedure, see CD1100.

In some circumstances interest received by a solicitor can be included in trading income. This is where:

• there is an agreement between the solicitors and the client that the solicitor is beneficially entitled to interest on the client’s funds in the General Client Account; or
• the solicitor is not required to account to the client for interest earned on the client’s funds in the General Client Account under Solicitors Account Rules;

AND in both cases

• The fee charged by the solicitors to the client is reduced because the solicitor is entitled to the interest, so it is acknowledged that the solicitor’s income from the client is both the fee charged and the interest.

In which case the interest should be included in the trading income of the solicitor and charged to tax as a trade receipt for all purposes (see BIM40810).

See BIM65820 as regards temporary loans made by solicitors.