Fee policy 2011/12 – Questions and answers
Last updated 6 September 2011
Are any changes to the fee structure this year?
The Legal Services Board agreed both the 2011/2012 practising fee structure on 10 August 2011, and the determination of compensation fund contributions on 5 August 2011.
Broadly, the fee structure for this year will be the same as last year, when we introduced a significant change. We have reviewed last year's process and the impact on firms, and have concluded that the new fee structure is fit for purpose. This year, it is being adapted for alternative business structure (ABS) firms, and the renewal process will be offered online.
Is the total funding requirement be more or less than last year?
- In line with our commitment last year, the amount to be funded by regulatory fees will be less than last year.
- However, the amount to be funded for the Compensation Fund, also as predicted last year, will be higher.
There will be an overall reduction in the total funding requirement for this year. Whether this results in a reduction in the total payable by your firm will depend on
- the number of regulated individuals employed, and
- your turnover figure.
How will the total funding requirement be split between firm and individuals?
The first step in the new fee structure is to split the total funding requirement between the amount to be funded through individual fees and through firm fees. We have decided to maintain the same split as last year for regulatory fees, 40 per cent funded by individual fees and 60 per cent through firm fees. We think this is justified: Although our regulatory processes are becoming more firm focused, we are now involved in more consumer engagement and education, and in public interest work, which is of equal benefit to firms and individuals. The compensation fund requirement will, as last year, be split on a roughly 50/50 basis.
What
does the new 2011 fee policy mean in practice?
The agreed fees have resulted
in a reduction to the individual (practising certificate) fee, which was £428 last year.
The turnover table, used to calculate the firm fee, has been revised, reducing the percentages for each band.
The Compensation Fund will, as last year, be split on a roughly 50/50 basis. Last year's compensation fund requirement was unusually low, and we anticipated an increase for this year. This is now reflected in the contributions approved by the Legal Services Board.
Will there be any discounts on the individual fee?
The 50 per cent maternity leave discount on the individual fee is the same as last year. We know that there have been changes in the law to extend rights to paternity leave. Having considered the position, we have concluded that the principle of discounts needs to be thoroughly reviewed. We propose to consult fully on that next year, when we will have been able to do the more-thorough analysis we have not had time for this year. The current maternity discount is available to all, and is not based on hardship caused by low income. This does not seem fair. To extend such a discount to those on paternity leave would simply compound the problem. We believe that perhaps a discount based on low income (whatever the cause) might be more targeted at hardship and, so, fairer.
How will new firms be charged?
For this year, we propose to charge brand new firms the same fixed fee (£1,000, pro rata according to the date of recognition/authorisation
) as last year. (Note that, in future, we may change this to base the fee on the estimated turnover for the first 12 months.) As a result of feedback last year, and in the light of the higher contribution, we will also charge the firm compensation fund contribution to new firms pro rata according to the date of recognition.
What about firms created through a split/merger?
Note that the above fixed fee only applies to brand new firms and not to new recognised bodies
or recognised sole practitioners
set up, on any date, as a result of a change of legal status or a split or merger. Such firms are successor practices and, on setting up a new recognised body
or sole practitioner firm, are given credit for the regulatory fees already paid for that year. Their firm fee on the next renewal will be based on previous turnover, allocated in accordance with the required Notice of Succession. We provided last year for a fee to be charged to firms whose Notice of Succession does not include an agreed allocation of turnover. This year, we will apply a fee of £250 to cover the cost of having to make a determination for such firms.
How will this be adapted for ABS?
We have consulted on proposals that the same fee structure as that outlined here should apply. The main adaptations necessarily relate to how the many different types of new ABS should be treated. The first periodic fee, payable on authorisation, will be based on estimated turnover for the first 12 months (pro rata according to the date of authorisation). A recognised body (including an LDP) converting to ABS status during a practice year, or becoming part of a larger ABS, will be given credit for the fees and contributions already paid. The key difference is that a brand new ABS, starting a business from scratch, will also be required to give an estimate of turnover for the first 12 months, and the firm fee will be based on that estimate, rather than being a fixed fee. This seems fairer, given that the new opportunities for ABS are likely to result in a much greater disparity in size even for brand new ABS. ABS which also provide services that are not regulated by the SRA will have the fee based on turnover from the activities that are regulated by the SRA, not on total turnover.