Page 273 - IOM Law Society Rules Book

ADVOCATES ACCOUNTS RULES 2008

Notes
(i) The sum in lieu of interest has to be calculated over the whole period for which money is
held – see rule 25(2). The advocate will usually account to the client at the conclusion
of the client’s matter, but might in some cases consider it appropriate to account to the
client at intervals throughout.
(ii) When looking at the period over which the sum in lieu of interest must be calculated, it
will usually be unnecessary to check on actual clearance dates. When money is
received by cheque and paid out by cheque, the normal clearance periods will usually
cancel each other out, so that it will be satisfactory to look at the period between the
dates when the incoming cheque is banked and the outgoing cheque is drawn.
(iii) Different considerations apply when payments in and out are not both made by cheque.
So, for example, the relevant periods would normally be:
• from the date when an advocate receives incoming money in cash until the date
when the outgoing cheque is sent;
• from the date when an incoming telegraphic transfer begins to earn interest until
the date when the outgoing cheque is sent;
• from the date when an incoming cheque or banker’s draft is or would normally be
cleared until the date when the outgoing telegraphic transfer is made or
banker’s draft is obtained.
(iv) The sum in lieu of interest is calculated by reference to the rates paid by the appropriate
bank or building society (see rule 25(2) to (4)). Advocates will therefore follow the
practice of that bank or building society in determining how often interest is
compounded over the period for which the cleared funds are held.
(v) Money held in a client account must be immediately available, even at the sacrifice of
interest, unless the client otherwise instructs, or the circumstances clearly indicate
otherwise. The need for access can be taken into account in assessing the
appropriate rate for calculating the sum to be paid in lieu of interest, or in assessing
whether a reasonable rate of interest has been obtained for a separate designated
client account.
(vi) Advocates are reminded to consider any taxation implications relating to interest received
and paid on client bank accounts. In particular, but without prejudice to the generality
of the foregoing, advocates should consider any formal notice received from the
Assessor of Income Tax, including such notices as are included in the annual tax
returns of incorporated practices, and the impact of the European Union Savings Tax
Directive which came into effect on 1 July 2005.

Rule 26 – Interest on stakeholder money

When an advocate holds money as stakeholder, an advocate must pay interest, or a sum in lieu
of interest, on the basis set out in rule 24 to the person to whom the stake is paid.

Note
For contracting out of this provision, see rule 27(2) and the notes to rule 27.

Rule 26 – Interest on stakeholder money page 30