What is client money?

Client money is money an accounting firm, law firm, property agent or investment business holds that belongs to a client rather than to the firm: tax refunds passing through, funds held for payments, deposits. UK rules require it to be kept in a separate client bank account, reconciled regularly and never mixed with the firm's own money.

Definition

Separate client bank accountCore rule

ICAEW, ACCA, FCAUK regulators

Late reconciliationCommon failure

For accountants the rules come from the professional bodies: ICAEW's Clients' Money Regulations and ACCA's equivalent require a designated client account, written client consent, prompt banking, five-weekly reconciliations and an annual compliance review. The FCA's CASS rules cover investment firms, and property agents have their own regime. Technology's role is the reconciliation and the audit trail: practice tools and ledgers can ring-fence client accounts, and reconciliation software proves the balances. Holding client money is also a common reason firms are disciplined, which is why many refuse it altogether.

Common questions

What is a client money account?+

A bank account in the firm's name but designated as holding clients' funds, kept separate from the office account, with the bank acknowledging that the money is held on trust for clients.

Can an accountant hold client money in a business account?+

No. Client money must be in a designated client account. Paying it into the firm's ordinary business account breaches the professional body's regulations.

How often must client money be reconciled?+

ICAEW requires reconciliation at least every five weeks; many firms do it monthly with the close. Investment firms under CASS reconcile daily.