There's no yes or no for virtual accounts as a category. The SRA Accounts Rules set tests for client accounts and for third party managed accounts, and any provider's virtual or collection account has to be measured against them on its own terms and flow of funds. Your firm makes that call with its COFA, and the practical job is getting the facts from the provider in writing first.
In this article
The short version
- Virtual accounts have no blanket compliance answer, because each provider's set-up has to be tested against the SRA Accounts Rules on its own flow of funds.
- The Code of Conduct for Firms puts the compliance duty on the COFA, so the view on how a provider's facts fit the Rules stays with your firm.
- Under rule 3.1 a client account must be held at a bank or building society in England and Wales, and a payment institution only qualifies with deposit-taking permission.
- A third party managed account is allowed under rule 11 only if the firm never receives or holds the money and the client understands the terms first.
- Get written answers on which entity receives the money, whose name the account is in, and whether fees or chargebacks could reach client money.
Why a provider can't answer this for you
A payments provider pitches a virtual account for client payments: a unique account number and sort code for each client or matter, money matched automatically, no more reference hunting. Asked whether it's allowed, the sales team says other law firms use it.
That doesn't answer the question, because "virtual account" covers very different set-ups. Often it's an account number that routes incoming transfers to a balance with the provider, which then pays out to a bank account you nominate. The provider might be a bank, a payment institution, an e-money institution, or an agent of one, and each sits differently against the Rules whatever the product is called.
The Code of Conduct for Firms gives the COFA the duty to take reasonable steps to make sure the firm complies with the Accounts Rules. A provider can tell you facts about its entities, accounts and money flows, but the view on how those facts fit the Rules stays with your firm.
What your firm has to establish with its COFA
Whether the firm ever receives or holds the money. If money for a client's matter is held or received by the firm at any point, it's client money, and it has to go into a client account promptly. An account in the firm's name that collects money before paying it on differs from one where the firm never holds the funds.
Whether anything is being treated as a client account. Under rule 3.1, a client account must be held at a branch or head office of a bank or building society in England and Wales. "Bank" here means a firm with permission to accept deposits. A payment or e-money institution doesn't meet that description unless it also holds deposit-taking permission, and you can check any provider's permissions on the FCA register.
Whether the arrangement is presented as a third party managed account. Rule 11 allows one only if using it doesn't result in the firm receiving or holding the client's money, and only if the client understands the terms, including who pays the fees, before you take instructions. The SRA's guidance also limits which types of FCA-authorised provider can offer one and expects to be told when a firm starts using one.
How the everyday mechanics work. You need to know how a payment covering both a bill and money on account gets split, whether provider fees, refunds or chargebacks could be taken from client money, and whether the reports are good enough to reconcile client accounts at least every five weeks.
Questions to ask any payment provider
Ask for the answers in writing, so your reporting accountant can see them too.
- Which legal entity receives the client's payment, and what FCA permission does it hold?
- Whose name is the receiving account in, and whose money is it while it sits with you: the firm's, the client's, or your safeguarded funds? What happens to it if you fail?
- Does the money pass through any account in the firm's name other than our client account, even briefly?
- Are payouts gross or net? If fees, refunds or chargebacks are deducted, from which account, and could any of them reach client money?
- Can one payment covering a bill and money on account be split, and how soon after the client pays does the money reach the account we nominate?
- Does every payment carry the client and matter reference through to your reports and our bank statement, in enough detail to reconcile to the client ledger?
If a provider says its product is a third party managed account, add: which type of authorised payment institution are you, what terms must the client agree, and who bears the fees?
How to use the answers
Take the written answers to your COFA before anything goes live. Compare answers to questions 3 and 4 closely, since set-ups that sound alike often differ there.
Adfin, for example, pays out every weekday at the full amount clients paid, invoices its own fee separately, and matches every payment to its invoice, including payments with a missing reference. Product facts like these don't settle how any arrangement sits against the Accounts Rules for your firm, so they go through the same review as any other provider's answers.
Where money is held is also a separate question from getting bills paid on time. Adfin's Customer Agents can follow up over email, SMS or WhatsApp on a schedule your firm sets, with your team approving what goes out, whatever you decide about where payments are received.
Common questions
Is a payment institution a bank for the SRA Accounts Rules? Not unless it also holds permission to accept deposits, which is what "bank" means for the Rules. The FCA register shows each provider's permissions.
Is money held in a third party managed account client money? The SRA's guidance says it isn't, because the firm doesn't hold or receive it. The Rules allow one only if that stays true and the client understands the terms and fees before instructions.
Do we need the SRA's permission to use a third party managed account? No, but the SRA expects to be notified and publishes a form for it.
What if one client payment covers both a bill and money on account? That's a mixed payment, and the Rules require you to allocate it promptly to the right client or business account. Ask any provider how it handles a payment that needs splitting.
Will the SRA's client money reforms change the answer? They may in time, but none of the proposals from the SRA's 2024 to 2026 consultations is in force. Until changes take effect, the tests are those in the current Accounts Rules.
Can we rely on a provider's statement that its account is SRA compliant? No. The Rules put the decision on your firm and its COFA, so treat any such claim as a starting point for the questions above.
Sources
- SRA - SRA Accounts Rules (accurate as of September 2026) https://www.sra.org.uk/solicitors/standards-regulations/accounts-rules/
- SRA - Third party managed accounts (accurate as of September 2026) https://www.sra.org.uk/solicitors/guidance/third-party-managed-accounts/
- legislation.gov.uk - Solicitors Act 1974, section 87 (accurate as of September 2026) https://www.legislation.gov.uk/ukpga/1974/47/section/87
- SRA - Code of Conduct for Firms (accurate as of September 2026) https://www.sra.org.uk/solicitors/standards-regulations/code-conduct-firms/
- SRA - Further consultation on client money in legal services: Protecting the client money that solicitors hold (accurate as of September 2026) https://www.sra.org.uk/sra/consultations/consultation-listing/legal-services-client-money/
- Adfin - Pricing (accurate as of September 2026) https://www.adfin.com/pricing
