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Regulation 8(1)

ATTORNEYS ACT, 1979 (ACT NO.53 OF 1979)
AMENDMENT OF REGULATION 8(1)
cts

REGULATION 8(1)

In terms of the above regulation it became mandatory, on 1 March 2016, for practitioners to pay over interest earned on trust current banking accounts to the Attorneys Fidelity Fund (AFF) on a monthly basis, via the appropriate collecting Law Society. The authority for this change is contained in regulation 8(1) to the Attorneys Act 53 of 1979.

The requirement to pay over net interest monthly as described above is applicable to all trust current banking accounts operated under section 78(1) of the Act.

The four largest banks in South Africa offer products for attorneys that automate the monthly collection process in a seamless fashion with little or no practitioner involvement.

Recoverable bank fees/charges, as defined by the AFF, are automatically set of against the interest earned before the Banks make payment of the net interest to the appropriate collecting Law Society.

Practitioners are urged to make use of this Automated Monthly Transfer System (AMTS) that the Banks offer to their attorney clients.

The designated collecting Law Society will upload the information received from the Banks into their membership management system.

The AMTS works as follows:

  • All transaction fees/charges and credit interest accumulate during the course of the month in the trust current banking account
  • This information is often reflected in a memorandum column on the bank statement and then aggregated and debited to the trust current banking account on a certain day which is normally the last working day of the month or very close thereto
  • On the day that the accrued bank fees/charges and interest are posted to the trust current banking account, the VAT exclusive portion of the bank fees/charges is compared against the interest credited to the trust current banking account during the month
  • If the interest credited to the trust current banking account during the month exceeds the VAT exclusive value of the bank fees/charges, the Bank pays over such excess to the bank account of the Law Society nominated by the practitioner
  • If the VAT exclusive value of bank fees/charges exceeds the interest credited to the trust current banking account the Bank will debit the business current account of the practitioner with excess value of the VAT exclusive bank fees/charges
  • In all cases, the value of VAT raised on bank fees/charges during the month must be debited by the Bank to the practitioner’s business current account. Such VAT should be claimed as a VAT input credit by the practitioner when the practitioner submits the regular VAT return to SARS. Practitioners who are NOT VAT registered may recover such VAT from the AFF by completing the annual claim form accordingly
  • The Bank will generate a monthly report to the collecting law society in respect of each practitioner firm, indicating:
    • Interest credited to the trust current banking account
    • VAT exclusive bank fees/charges debited to the trust current banking account
    • Net amount paid over to the collecting law society
  • Should a practitioner choose not to use the AMTS product offered by the banking industry, the practitioner is required to pay over the net interest earned in the trust current banking account to the collecting Law Society, of which he is member, on a monthly basis indicating :
    • Interest credited to the trust current banking account
    • VAT exclusive bank fees/charges debited to the trust current banking account
    • Net amount paid over to the collecting law society

Interest generated on trust savings or any other interest bearing accounts under section 78(2)(a) of the Act may be paid over annually

SECTION 78(2)(a) TRUST SAVINGS ACCOUNTS OR OTHER INTEREST BEARING ACCOUNTS

Section 78 – Trust accounts in terms of the Attorneys Act 53 of 1979

(2)(a) Any practitioner may invest in a separate trust savings account or other interest-bearing account opened with any banking institution or building society any money deposited into the firm’s trust banking account which is not immediately required for any particular purpose

(b) Any trust savings account or other interest-bearing account referred to above in paragraph (a) shall contain a reference to this subsection

Generally speaking the rate of interest earned on a section 78(2)(a) interest bearing account can be up to 45% more than the rate of interest earned on a section 78(1) trust banking account.

Practitioners are urged to engage with their banks and transfer money, which is not immediately required for any particular purpose, from their trust accounts into an interest-bearing account in terms of section 78(2)(a).

The practitioner will earn more interest on a section 78(2)(a) investment compared to the interest earned on a section 78(1) trust banking account.

This in turn will result in the Attorneys Fidelity Fund (the Fund) receiving more income to assist the Fund in carrying out its mandate in terms of the Attorneys Act 53 of 1979 and the Legal Practice Act 28 of 2014.

This increased interest earned by the firm will result in the 20% net interest subsidy increasing which will increase the firm’s annual audit fee subsidy where a firm’s audit fees are currently not fully covered by the 20% of net interest subsidy.

The AFF is actively engaging with practitioners so as to encourage firms to invest section 78(1) funds, which are not immediately required for any particular purpose, into an interest-bearing account in terms of section 78(2)(a)so as to benefit from a higher rate of interest.