Changes to regulatory fees and the OLC levy for CLC-regulated practices

29 October, 2024

Each year before the beginning of the licence year, and after consulting with the profession, the CLC makes an application to the LSB to approve the regulatory charges payable by the profession for the next licensing year. The LSB has now approved that application and we are writing to all practices to advise them of each practice’s fees for the new licensing year starting on 1 November 2024.

You can find more information about the regulatory fee applications made by the CLC and the LSB’s decision here. The applications include information relating to:

1. The proposed changes to the regulatory fees
2. The reason for making or not making changes to regulatory fees being levied
3. The current and forecast expenditure of the CLC
4. How your regulatory fees will be applied to the various regulatory functions and regulatory objectives

The fee rate proposals were subject to an open consultation over the summer. The consultation and responses can be found here.

A summary of the of the CLC’s expenditure by cost category and allocation by function for the current and next financial year can be found in annex E.

The regulatory fees payable by CLC regulated practices include:

1. A Practice Fee – determined by the practice’s turnover and a tiered contribution rate (See Annex B for the contribution rates). This fee is used to fund CLC operating activities;
2. A Compensation Fund Contribution – determined by the practice’s turnover and a tiered contribution rate (See Annex B for the contribution rates). This Fee is used exclusively to fund the Compensation Fund operations, including compensation fund claims, interventions and storage of closed practice files and related administration;
3. An OLC Levy – comprising the costs charged to the CLC by the legal Ombudsman and allocated to practices based on practice fees and cases accepted for investigation by the Legal Ombudsman. The fees collected are paid to the Legal Ombudsman and is not used to fund CLC operating activities. (See Annex D for the OLC estimate and the levy calculation).

All practices are required to pay the Practice Fee, Compensation Fund Contribution and OLC Levy as a condition of licence. All practices have the option to pay these charges in 12 monthly, interest fee payments, payable by direct debit. Please note that all regulatory fees are due on invoice. Any practice that takes advantage of the instalment payment option and decides to close during the Licensing year, will be required to pay the balance outstanding on notification.

While we always endeavour to keep our regulatory charges as low as possible, we have had to increase the Practice Fee again this year due to a reduction in aggregate practice turnovers (1%), inflationary pressures and increasing regulatory requirements such as AML supervision and the requirement to meet an additional regulatory objective and responding to more prescriptive regulatory requirements from the LSB and other stakeholders.

The regulatory charges and any changes made to these arrangements are summarised in the table below:

Changes to the OLC levy

The Legal Ombudsman (LeO) costs are recovered from all approved regulators (and by extension the regulated community) through a recharge in accordance with the Legal Services Act 2007 (Levy) (No.2) (Amendment) Rules 2014.

The legal Ombudsman allocates their annual cost to regulators based on the percentage of the total cases accepted for investigation in the previous 3-years. The legal Ombudsman charge to the CLC is then recharged to practices via an availability and usage fee as follows:

• 50% (previously 70%) of the total cost is allocated to all practices proportionate to their practice fee. This is for the availability of the Ombudsman service.
• 50% (previously 30%) of the total cost is allocated to practices using the case numbers provided by and used in the Ombudsman’s cost allocation calculations. The CLC uses the case numbers provided by LeO.

The CLC wrote to all practices in April 2024 advising of changes to the billing arrangements and that we would amend the levy collection invoice (which was initially based on the prior year’s actual charge) once we had received the new estimates from LeO. LeO has now issued the estimate for 2024/25 and the levy collections is being amended based on the revised allocations between usage and availability, updated case numbers and the new cost estimate.

The number of cases allocated to CLC regulated practices for the 2024/25 billing period has increased to 468 (2023/24: 372) and that the estimated cost for the year is £1,213,568 (2023/4 £1,039,942). The allocation of these costs between the availability and usage charge has also been amended as indicated above. The increase in cost being allocated to practices is driven by inflationary increases as well as the increase in case numbers.

Because LeO use the number of cases accepted for investigation to allocate cost to regulators, the CLC uses these same case numbers (as advised by LeO) to allocate the usage cost.