Advice and Information related to Rule D4: Starting a New Practice
Starting a New Practice
This information is intended to assist those starting a new practice unit.
Restriction on practice as a manager
Rule D2.1 (Restriction on Practice) requires you to have held an unrestricted practising certificate and to have been employed as a fully qualified solicitor for a total of three years, of which at least one year must be immediately prior to starting your practice. The rules are subject to some exceptions and contain power to grant a waiver and such requests will be considered by the Professional Practice (Rules & Waivers) Sub-Committee, but they interpret the rules quite strictly and waivers are not routinely granted.
Guarantee fund contribution
All managers (principals) in private practice must pay the appropriate contribution to the Guarantee Fund. The contribution is not apportioned as the legislation requires it to be paid for each year or part of a year. The year in question is 1 November to 31 October. Payment should be made to the Society's Registrar's Department before you start to practice on your own, if you have not already paid it as a manager of another practice unit in that practice year (see Schedule 3 part 1 of Solicitors (Scotland) Act 1980).
Professional indemnity insurance
You must also have professional indemnity insurance under the Master Policy before commencing your own practice (see Rules D1 (Practising Certificate) and B7 (Professional Indemnity Insurance)). You should consider whether the cover under the Master Policy will be sufficient taking into account the nature of the business you intend to carry on.
To obtain a proposal form for the Master Policy contact Lockton.
Once the completed form has been processed by Lockton they will issue the appropriate Certificate of Insurance, and will provide you with a copy which you must then send to the Registrar's Department at the Society. That department will not put your practice unit on the Society's website until they have seen evidence of your insurance cover.
When you set up in practice it is important that you put in place procedures and systems to reduce your risk of claims.
Further information is available in the Journal -
If your practice is to be restricted to criminal court work, you will be able to obtain a substantial discount on the Master Policy premium provided that you provide Lockton with a written undertaking to restrict your practice in this way.
If you will be handling clients' money at all, it is essential that you should set up the books, ledgers and cash room procedures that you will need to comply with Rule B6 (Accounts etc) before you start your practice.
The Guarantee Fund Committee recommends that you meet with a member of the Society's Financial Compliance team before you set up in practice if you will be handling clients' money. The meeting would discuss how to comply with the Accounts Rules and your general understanding of them.
It would be sensible at an early stage and before you start up in practice to consult an accountant, both for accounting and tax advice and for advice on setting up the appropriate bookkeeping procedures to comply with the Accounts Rules. If you would like help in choosing an accountant please discuss this at your meeting with the Financial Compliance team.
A member of that team will carry out an inspection of your books in terms of the Accounts Rules within 6 to 9 months of starting up your practice to make sure that your bookkeeping is satisfactory. The date will be intimated to you in advance.
You will be required to provide the Society with Accounts Certificates in accordance with the Accounts Rules. You may wish to have your accountant help you with the preparation of these certificates but that is not mandatory.
The Accounts Rules also require you to comply with the Money Laundering Regulations 2007 and the Proceeds of Crime Act 2002. You will require to have formal record keeping procedures and maintain internal reporting procedures as well as verifying the identity of every client. Such verification should have regard to the risk of money-laundering in the particular matter. That risk may vary from nil to substantial depending on the type of matter or transaction, the nature of the client's business etc.
Before you start practice contact HMRC to ascertain whether you need to register for VAT. Your accountant will be able to advise on this and should also be able to advise whether it would be desirable to do so even if your projected turnover in your first year would not exceed the VAT threshold. If you decide not to register and you are undertaking legal aid work you should advise SLAB so they do not pay VAT on legal aid fees. If your turnover increases and you do subsequently register for VAT you must immediately advise SLAB so that VAT can be added to the fees payable to you from then on.
Legal aid work
You will require to register for both civil and criminal legal aid (including advice and assistance) and should contact SLAB to do so.
The Society deals with quality assurance in civil matters (see Rule C3 and related items).
Practice Unit Information
You must inform the Society of the commencement of practice and certain other details relating to the practice unit within 7 days of commencement by completing and returning the appropriate form. The form may be downloaded from the Forms and Fees section of the Society's website.
If your firm wishes to undertake mainstream financial business or investment business authorisation is required direct from the Financial Services Authority.
For Incidental Financial Business licensed through the Society see Rule C2 and the related Guidance.
Practice management course
If you have not previously been a manager (principal) in a practice within the last three years before setting up your practice unit you will require to attend the Society's practice management course. The course is held twice a year in June and November and you will receive an automatic invitation from the Society's Update Department. You must attend the course within 12 months of becoming a manager unless you are granted an extension of time by the Society's Registrar.
Data Protection Act
All practice units are required to be registered with the UK Information Commissioner under the Data Protection Act: http://www.ico.gov.uk