By Simthandile Kholelwa Myemane
Section 78(3) of the Attorneys Act 53 of 1979 obliges practitioners to pay any interest earned on deposits in trust accounts in terms of s 78(1) and (2) over to the Attorneys Fidelity Fund (AFF). The AFF has, at its discretion, allowed the following in this regard:
Practitioners may deduct 100% of the allowable bank charges incurred on the s 78(1) funds and pay over the net interest to the AFF. However, if the bank charges incurred exceed the interest earned on the s 78(1) funds, the practitioner bears the cost.
The AFF advises practitioners of allowable deductibles and the following charges are currently disallowed:
It is the responsibility of practitioners to ensure that the correct interest is paid to the AFF on time. In terms of the Fidelity Fund certificate (FFC) issued on behalf of the AFF by the practitioner’s statutory law society, which enables an attorney to practise for his or her own account, the interest earned annually up to the last day of February each year should be paid to the law society by 31 May of that year.
An automated monthly transfer system, whereby the banks automatically transfer the interest over to the law societies for further pay-over to the AFF, can be used by practitioners. This system does not take the responsibility away from the practitioner to ensure correct payment; it still remains the duty of the practitioner to ensure that the correct interest is paid. Should the practitioner realise that the bank passed on disallowed bank charges, it is the responsibility of the practitioner to pay the amount involved.
In determining how much of the bank charges to offset against earned interest, a value-added tax (VAT) registered practitioner will reduce the claimed bank charges by the VAT portion, while a non-registered practitioner will claim VAT inclusive of bank charges. Table 1 (below) is an illustration of how VAT registered and non-registered practitioners will determine the net interest that needs to be paid.
Practitioners must reclaim the cost of their trust audit fees from the AFF. The current audit fee refund formula requires:
These reclaims, for both bank charges and trust audit fees, are subject to the practitioner complying with the preferential banking arrangements for trust banking accounts, as shown on the AFF’s website (www.fidfund.co.za) under ‘banking options’ and sufficient trust interest being generated by a firm to defray such bank charges.
Table 1: An illustration of how VAT registered and non-registered practitioners will determine the net interest that needs to be paid.
| Type of firm | Interest earned | VAT inclusive bank charges (allowable) | VAT portion deducted | Bank charges reclaimed | Net interest paid |
| VAT registered | R 8 956,78 | R 1 956,32 | R 273,89 | R 1 682,44 | R 7 274,35 |
| VAT non-registered | R 8 956,78 | R 1 956,32 | Nil | R 1 956,32 | R 7 000,46 |
Simthandile Kholelwa Myemane BCom Dip Advanced Business Management (UJ) Cert Forensic and Investigative Auditing (Unisa) is a lead forensic investigator at the Attorneys Fidelity Fund in Centurion.
This article was first published in De Rebus in 2014 (April) DR 23.
