Q: How should the monthly payments be treated under the accounts rules and for VAT purposes?A: Paragraph 12.B.4 of the civil contract and 12.B.13 of the criminal contract allow the standard monthly payments (SMP) to be placed in office account.However, the Solicitors' Accounts Rules as they currently stand only allow for payments on account from the Legal Services Commission to be paid into client account.

The SMP is a new, hybrid type of payment that is not strictly covered by the present rules.

The Law Society is working on amendments to the rules, but as an interim measure, guidance is being issued permitting solicitors to put the payments into office account, notwithstanding the wording of the current rule.

The guidance is detailed, and solicitors should read it carefully.

In brief, so long as a sum on account of estimated disbursements is transferred to client account, the monthly payment may be placed in office account.

There is much more to the guidance than this, though, which is why solicitors should refer to the original guidance rather than relying on any summary of it.For VAT, guidance has recently been issued by Customs and Excise and all practitioners should take steps to familiarise themselves with it.

The present view of Customs and Excise is that payment of the SMP is a tax point for VAT purposes.

This means that solicitors must account for VAT on the unallocated part of any SMP if it exceeds the amount of claims billed, and on the totality of claims billed if this exceeds the SMP.

The difficulty with this approach is that part of the SMP is money on account of disbursements that are not subject to VAT.

As a result, the calculation of the actual amount of VAT payable is extremely complex, and should where possible be agreed with Customs and Excise.

Reference should be made to the most up-to-date guidance from Customs and Excise before attempting the calculation.There are slightly different rules for firms operating a cash accounting system.

Such firms should refer to the guidance direct.An added complexity arises if the commission claws back payments on the basis that the SMPs were too high and the lawyer has been overpaid.

In this situation, the amount refunded is no longer treated as payment on which VAT must be paid, and a refund may be claimed.

If the commission does seek to reclaim money from you, you should discuss with your contracts manager the effect of having actually paid out VAT on the payments received, and any additional cashflow difficulties this might cause, when seeking to agree the level of any reduced SMP or the schedule for any repayments.Q: What is the public interest panel and what relevance is it to me?A: Some cases that are at first glance excluded from public funding may well be brought back into scope if they have some degree of wider public interest.

Every firm is likely to have some cases that might meet this test.

Given a solicitor's professional duty to advise clients whether public funding might be available, it is important that advisers remember this provision, and familiarise themselves with the circumstances in which they might be able to make use of it.Under the funding code, where a case has a wider public interest, it can be treated more leniently than other cases in the same category in terms of the merits and cost benefit thresholds.

'A case with a significant wider public interest may be funded even if prospects of success are in the borderline merits category or if the individual case in question would not, by itself, be cost-effective.

In such cases, a more general cost benefit test applies in place of the strict cost benefit ratios in the general funding code' (Funding Code Guidance, paragraph 5.1(4)).

Moreover, proceedings that are otherwise out of scope can qualify for funding if there is a wider public interest element to the case.Under the definition, a case 'must have the potential to produce "real benefits" for individuals other than the client.

This is intended to be a wide concept which covers a great variety of different types of benefit, some of which may be directly quantifiable, while others are indirect or intangible' (paragraph 5.2(2)).

Those benefits can be in relation to the protection of life or basic human rights, direct or potential financial benefit or improved quality of life.The public interest advisory panel (PIAP) was set up to report to the commission on cases that are alleged to raise a wider public interest issue.

The application is submitted in the usual way on form CLS APP 1.

If it contains a claim that there is a wider public interest element in the case, it is referred to the panel, which delivers its advice on the claim.

There are four possible verdicts: no significant wider public interest, or significant, high or exceptional wider public interest.

The commission then considers the application for funding in the light of the advice from the PIAP.Cases considered to have a wider public interest include a challenge by way of judicial review under the Human Rights Act (HRA) of prison disciplinary proceedings.

Also challenged under the HRA in an application considered to have significant to high wider public interest was the law imposing criminal penalties on lorry drivers who bring illegal immigrants into the country.At the more mundane level, a case concerning whether a portable heater can be an 'installation' for the purposes of the Landlord and Tenant Act 1985 was found to have significant wider public interest.

An action against the police concerning their presence at an unlawful eviction was rated as having 'high' wider public interest.What is particularly noteworthy is the wide range of proceedings for which it has been possible to consider funding; they have included inquests, proceedings before Social Security Commissioners, personal injury cases, planning matters, special educational needs tribunals.

If you have a case in one of these or any other unusual or apparently excluded field or forum, take another look at it.

It is important to your client.

Is it important to other people? If so, it may be worth submitting an application.

Indeed, your professional duty may require it.