Corporate report

Annual Report and Accounts 2024-25: Financial Statements (HTML)

Published 16 October 2025

Applies to England and Wales

© Crown copyright 2025

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2024-25 2023-24
Notes £000 £000
Statutory charge interest   (4,010) (4,330)
Income under the legal aid schemes 3 (49,086) (33,996)
Other income   (194) -
Total operating income   (53,290) (38,326)
       
Expenditure under the legal aid schemes 4 2,342,705 2,228,394
Staff costs 5 59,290 55,080
Other operating expenditure 5 41,613 34,308
Depreciation, amortisation and impairment 4,5 10,017 6,790
Total operating costs   2,453,625 2,324,572
       
Net operating costs   2,400,335 2,286,246
       
Other comprehensive expenditure      
Net (gain)/loss on revaluation of intangibles 6 (11) (276)
Net (gain)/loss on revaluation of property, plant and equipment 7 (5) (6)
Total comprehensive net expenditure   2,400,319 2,285,964

All income and expenditure are derived from continuing operations.

The notes on pages 96-134 form part of these financial statements.

31 March 2025 31 March 2024
Notes £000 £000
Non-current assets      
Intangible assets 6 24,804 21,766
Property, plant and equipment 7 1,326 316
Right-of-use assets 8 4,340 6,715
Trade and other receivables 10 118,892 121,453
Total non-current assets   149,362 150,250
       
Current assets      
Trade and other receivables 10 37,593 51,123
Cash and cash equivalents 11 34,023 51,837
Total current assets   71,616 102,960
Total assets   220,978 253,210
       
Current liabilities      
Trade and other payables 12 (240,023) (215,001)
Other financial liabilities 13 (1,347) (928)
Provisions for liabilities and charges 14 (1,033,420) (957,230)
Total current liabilities   (1,274,790) (1,173,159)
Total assets less current liabilities   (1,053,812) (919,949)
       
Non-current liabilities      
Other financial liabilities 13 (3,054) (5,599)
Provisions for liabilities and charges 14 (593) (722)
Total non-current liabilities   (3,647) (6,321)
Total assets less liabilities   (1,057,459) (926,270)
       
Taxpayers’ equity      
Revaluation reserve   2,128 2,591
General reserve   (1,059,587) (928,861)
Total taxpayers’ equity   (1,057,459) (926,270)

The notes on pages 96-134 form part of these financial statements.

Signed for and on behalf of the Legal Aid Agency

Jane Harbottle CBE

Chief Executive and Accounting Officer

Legal Aid Agency

8 October 2025

2024-25 2023-24
Notes £000 £000
Cash flows from operating activities      
Net operating cost 2 (2,400,335) (2,286,246)
Adjustments for notional and non-cash transactions 4, 5 44,423 36,028
Legal aid costs met by HMCTS   7,712 6,790
Intra-departmental balances settled via General Reserves   (2,468) (3,281)
Decrease in trade and other receivables 10 16,091 1,540
Increase in trade and other payables 12 25,022 3,996
Decrease in other financial liabilities 13 (2,126) (600)
Less repayments of principal on leases 8 1,962 1,342
Less lease additions and remeasurements 8 164 (149)
Less movements in payables relating to items not passing through the Statement of comprehensive net expenditure 7 - 387
Movement in legal aid provisions 14 75,848 97,264
Net cash outflow from operating activities   (2,233,707) (2,142,929)
       
Cash flows from investing activities      
Purchase of intangible assets 6 - (128)
Purchase of property, plant and equipment 7 (145) (8)
Net cash outflow from investing activities   (145) (136)
       
Cash flows from financing activities      
Supply funding from MoJ: revenue   2,217,855 2,147,343
Supply funding from MoJ: capital   145 (343)
Repayments of principal on leases 8 (1,962) (1,342)
Net cash inflow from financing activities   2,216,038 2,145,658
Net increase/(decrease) in cash and cash equivalents in year 11 (17,814) 2,593
Cash and cash equivalents at the beginning of the year 11 51,837 49,244
Cash and cash equivalents at the end of the year 11 34,023 51,837

Prior year comparatives have been reclassified to separately disclose costs met by HMCTS, which were previously shown as cash supply funding received from MOJ.

The reclassification is required as no cash flows to or from the LAA for these costs.

The notes on pages 96-134 form part of these financial statements.

General reserve Revaluation reserve Total
Notes £000 £000 £000
Balance at 1 April 2024   (928,861) 2,591 (926,270)
         
Comprehensive net expenditure for the year   (2,400,335) 16 (2,400,319)
         
Supply funding from MoJ: revenue   2,217,855 - 2,217,855
Supply funding from MoJ: capital   145 - 145
Non-cash adjustments        
Costs met by HMCTS   7,712 - 7,712
Intra-departmental adjustment   9,236 - 9,236
Notional recharge from MoJ 5 33,747 - 33,747
Notional external audit fee 5 435 - 435
Movement in reserves        
Transfers from revaluation reserve   479 (479) -
         
Balance at 31 March 2025   (1,059,587) 2,128 (1,057,459)
         
    General reserve restated Revaluation reserve restated Total restated
  Notes £000 £000 £000
Balance at 1 April 2023   (826,637) 2,775 (823,862)
         
Net operating cost for the year 2 (2,286,246) - (2,286,246)
         
Supply funding from MoJ: revenue   2,147,343 - 2,147,343
Supply funding from MoJ: capital   (343) - (343)
Other comprehensive expenditure        
Net gain on revaluation 6, 7 - 282 282
Non-cash adjustments        
Costs met by HMCTS   6,790 - 6,790
Intra-departmental adjustment   528 - 528
Notional recharge from MoJ 5 28,908 - 28,908
Notional external audit fee 5 330 - 330
Movement in reserves        
Transfers from revaluation reserve   466 (466) -
         
Balance at 31 March 2024   (928,861) 2,591 (926,270)

Prior year comparatives have been reclassified to separately disclose costs met by HMCTS, which were previously disclosed within funding received from MOJ.

The notes on pages 96-134 form part of these financial statements.

Notes to the financial statements for the period ended 31 March 2025

Note 1 – Statement of accounting policies

The financial statements have been prepared in accordance with the Government Financial Reporting Manual (FReM) 2024 to 2025, under the direction issued by HM Treasury under the Government Resources and Accounts Act 2000. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be most appropriate to the particular circumstances of the Legal Aid Agency (LAA) for the purpose of giving a true and fair view has been selected. The particular policies adopted by the LAA are described below. They have been applied consistently in dealing with items that are considered material to the financial statements.

a) Basis of preparation

The financial statements are presented in Sterling rounded to the nearest thousand (£000) unless otherwise stated. The financial statements have been prepared under the historical cost convention, modified to account for the revaluation of certain financial assets and liabilities.

Significant judgements and sources of estimation

The preparation of financial statements requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the reporting period.

The estimates and associated assumptions included within the financial statements are based on data held by the LAA, historical experience and various other factors. These are believed to provide a reasonable basis on which the carrying values of assets and liabilities that are not readily apparent from other sources can be estimated.

The key areas in which management make estimations are intangible assets (note 6), trade and other receivables (note 10) and provisions for liabilities and charges (note 14).

Going concern

The LAA is an executive agency of the Ministry of Justice (MoJ) established under the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 to commission, procure and pay for legal aid services from providers (solicitors, barristers, mediators and the not-for-profit sector).

The future financing of the LAA’s activities is expected to be met by the MoJ from funds which are voted annually under the relevant Appropriation Act. The LAA takes the view that the going concern concept applies as long as the provisions of the LASPO Act 2012 remain extant.

b) Changes in accounting policies and disclosures

Changes in accounting policies and interpretations, and new and amended standards adopted

The 2025 to 2026 FReM withdraws the option under IAS 38, ‘Intangible assets’, to remeasure intangible assets using the revaluation model from 1 April 2025. With permission from HM Treasury, LAA is adopting this adaptation early, with the change applied prospectively with a transition date of 1 April 2024. Carrying values at the transition date are now considered historical cost.

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 April 2023 and not early adopted

IFRS 17 ‘Insurance Contracts’ is being applied in the FReM from 1 April 2025 (with limited options for early adoption), with a transition date of 1 April 2024. IFRS 17 sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of IFRS 17 and replaces the previous standard IFRS 4 ‘Insurance Contracts’.

Per the FReM, for the purposes of applying IFRS 17, legislation and regulations, in isolation, are not equivalent to insurance contracts.

LAA has assessed the estimated impact of IFRS 17 on its financial statements through a review of contracts which could meet the definition of insurance contracts, and through a review of provisions, contingent assets and liabilities. The LAA does not consider that implementation of IFRS 17 will have a material impact on its financial statements for 2025 to 2026.

The LAA does not consider that any other new or revised standard or interpretation will have a material impact.

c) General reserve

Supply funding

Supply funding received from MoJ is credited to the General Reserve within the Statement of Changes in Taxpayers’ Equity upon receipt of funds. The LAA receives supply funding from MoJ periodically throughout the year and it is accounted for on a cash basis.

Intra-departmental adjustment

Intra-departmental adjustments relate to the settlement between the LAA and MoJ of:

  • transfers of property, plant and equipment and intangible assets
  • intercompany purchase and sale transactions

d) Segmental analysis

Operating segments are determined in accordance with IFRS 8 ‘Operating Segments’ based on what information is presented for decision making purposes to the LAA Board.

e) Income

The LAA’s income includes:

  • contributions from funded clients
  • costs recoverable from funded clients or others
  • recoveries from damages and statutory charges
  • Crown Court recoveries
  • recoveries of defence costs
  • income from the Public Defender Service
  • administration income

The majority of income relates to the reimbursement of legal aid spend, and we consider the legislation under which charges and recoveries are made to constitute a contract: this income is within the scope of, and accounted for under, IFRS 15, ‘Revenue from Contracts with Customers’.

Recoveries from damages and statutory charges

Statutory charges and damages arise when legally aided clients successfully gain or retain an asset or damages as a result of the legal assistance they receive. In these circumstances the client must repay the cost of their legal aid. If the client has insufficient disposable assets to repay the legal aid, the LAA gains security over the debt by registering a formal charge over the relevant asset.

Amounts are accounted for as income when they have been assessed as owing to the LAA, in accordance with the five-step model set out in IFRS 15 ‘Revenue from Contracts with Customers’.

Statutory charge interest receivable

Under the Legal Aid Act 1974, the Legal Aid Act 1988, the Access to Justice Act 1999, and the LASPO Act 2012, where funded clients have recovered or preserved property rather than obtaining damages, recoverable costs may be secured by a charge against the property. Under the Community Legal Service (Financial) Regulations 2000 as amended by the Community Legal Service (Financial) (Amendment) Regulations 2005 and the Civil Legal Aid (Statutory Charge) Regulations 2013, some of these debts are interest bearing debts which have interest due on the outstanding principal balance at 8% per annum.

Crown Court Means Testing

Income from Crown Court Means Testing is recovery of legal aid costs relating to criminal cases. The LAA is only entitled to this income when an applicant is convicted. The income is recognised at a point in time, on conclusion of a case. At this point the LAA has satisfied its obligation to provide legal aid services, and the outcome of the case and the amount the client is required to reimburse the LAA for legal aid costs are known.

f) Expenditure

Expenditure (notes 4 and 5) comprises sums payable, including:

  • the estimated value of work completed by legal aid service providers not yet billed
  • expenditure under the legal aid schemes which includes services provided to funded clients
  • refunds of contributions to funded clients
  • costs awarded to other parties and other costs associated with the provision of legal advice and assistance
  • other operating expenditure which includes the cost of staff and the administrative costs of running the LAA

g) Employee benefits

The LAA accrues for the expected cost of the annual leave entitlement of its employees in accordance with International Accounting Standard (IAS) 19 ‘Employee Benefits’.

h) Pensions

The Principal Civil Service Pension Scheme (PCSPS) is an unfunded defined benefit scheme of which the LAA is unable to recognise its share of underlying assets and liabilities. In accordance with the FReM, the LAA accounts for this as a defined contribution scheme. The LAA recognises contributions payable to defined contribution schemes as an expense in the year in which it is incurred, and the legal or constructive obligation is limited to the amount that it agrees to contribute to the fund.

i) Notional recharges

The notional recharge from MoJ represents the LAA’s usage of corporate services.

The notional audit fee represents the cost of the annual external audit performed by the National Audit Office on behalf of the Comptroller and Auditor General.

j) Accounting for Value Added Tax

Irrecoverable Value Added Tax (VAT) is charged to the relevant expenditure category or, if appropriate, capitalised with additions to non-current assets. Income and expenditure are otherwise shown net of VAT.

k) Assets under construction

Assets under construction are valued at historical cost within property, plant and equipment and intangible assets as appropriate, and are not depreciated or amortised. An asset ceases to be classified as an asset under construction when it is ready for use. Its carrying value is then removed from assets under construction and transferred to the respective asset category. Depreciation or amortisation is then charged on the asset in accordance with the stated accounting policy.

Expenditure is capitalised where it is directly attributable to bringing an asset into working condition, such as external contractor costs and relevant employee costs.

l) Intangible assets

Intangible assets comprise internally developed computer software (including assets under construction) and purchased software licences.

Development costs that are directly attributable to the design and testing of identifiable and unique software products, such as external contractor costs and relevant employee costs, are recognised as intangible assets when they meet the criteria of the FReM, which has been adapted from IAS 38 ‘Intangible Assets’. Other expenditure that does not meet this criteria is recognised as an expense as incurred.

The useful lives of internally developed software range from 1 to 10 years. In accordance with IAS 38 ‘Intangible Assets’, the LAA reviews the economic useful lives of its intangible assets each financial year.

Purchased software licenses are recognised when it is probable that future service potential will flow to the LAA and the cost of the license can be measured reliably. Such licences are initially measured at cost. Purchased software licenses are amortised over the license period.

The LAA applies a capitalisation threshold for intangible assets of £10,000.

Subsequent to initial recognition, intangible assets, excluding assets under construction, are restated to fair value. As no active market exists for the LAA’s intangible assets, fair value is assessed as replacement cost less any accumulated amortisation and impairment losses.

Prior to 1 April 2024, intangible assets were revalued each year at the reporting date using Producer Price Indices (PPI) for Current Cost Accounting, published by the Office for National Statistics (ONS).

From 1 April 2024, LAA is early adopting the FReM’s withdrawal of the option to use the revaluation model for intangible assets. The carrying values at the transition date of 1 April 2024 are considered historical cost, and assets are not revalued at the reporting date.

m) Property, plant and equipment

Property, plant and equipment assets costing more than the capitalisation threshold of £10,000 are treated as capital assets. Where an item costs less than the capitalisation threshold but forms part of an asset or grouped asset, whose total value is greater than the capitalisation level, the item is treated as a capital asset.

Property, plant and equipment is restated at fair value each year by indexation up to the year end using PPI for Current Cost Accounting, published by the ONS. This revaluation has not been carried out for 2024 to 2025, due to ONS flagging issues with their current and historic indices[footnote 1]. Prior years’ revaluations have been immaterial, both in-year and cumulatively, and the effect of pausing revaluation for 2024 to 2025 is also immaterial.

n) Leases

Scope and exclusions – LAA as lessee

In accordance with IFRS 16 ‘Leases’, contracts, or parts of contracts, which convey the right to control the use of an asset for a period of time are accounted for as leases.

Contracts for services are evaluated to determine whether they convey the right to control the use of an identified asset, incorporating both the right to obtain substantially all the economic benefits from the asset and to direct its use. If so, the relevant part of the contract is treated as a lease.

As adapted by the FReM, IFRS 16 has been applied to leases with nil or nominal (that is, significantly below market value) consideration and arrangements for accommodation between government departments.

When making the above assessments, the LAA excludes two types of leases. Firstly, those relating to low value items, which it considers as those where the underlying asset would have a cost of less than £10,000 when new, provided those items are not highly dependent on or integrated with other items. Secondly, contracts whose term (comprising the non-cancellable period together with any extension options the LAA is reasonably certain to exercise and any termination options the LAA is reasonably certain not to exercise) is less than twelve months.

Initial recognition – LAA as lessee

At the commencement of a lease the LAA recognises a right-of-use asset and a lease liability.

The lease liability is measured at the value of the remaining lease payments, discounted either by the interest rate implicit in the lease, or where this is not readily determinable, the LAA’s incremental rate of borrowing. This rate is advised annually by HM Treasury and is applied to leases that commence or are remeasured in that year.

Where the lease includes extension or termination options, the lease payments will be for the non-cancellable period together with any extension or termination options the LAA is reasonably certain to either exercise or not exercise.

In the event that a lease contract has expired but the LAA remains in occupation pending negotiations for a renewed term, the lease term has been measured as the estimated time until the new contract will be agreed.

The measurement of lease payments excludes any VAT payable, and irrecoverable VAT is expensed at the point it falls due in line with IFRIC 21 Levies. Where the Government Property Agency passes on the cost of VAT payable to a head landlord, but has not opted to tax the property, the VAT cost passed on is not expensed: it is included in the lease liability and right-of-use asset value.

The right-of-use asset is measured at the value of the lease liability, adjusted for any:

  • lease payments made before the commencement date
  • lease incentives received
  • incremental costs of obtaining the lease
  • costs of restoring the site at the end of the lease

Subsequent measurement – LAA as lessee

The lease liability will be adjusted for the accrual of interest, repayments, reassessments and modifications. Reassessments are reappraisals of the probability of the options given by the existing lease contract.

After initial recognition, the right-of-use asset will be measured using the fair value model. The LAA considers that the cost model (measurement by reference to the lease liability) is a reasonable proxy for fair value, in the case of non-property leases, and for property leases of less than five years or with regular rent reviews. For other leases, the asset will be carried at a revalued amount.

The value of the asset will be adjusted for subsequent amortisation and impairment, and for reassessments and modifications of the lease liability as described above. Where the amount of a reduction to the asset exceeds the carrying value of the asset, the excess amount is recognised in expenditure.

Expenditure for each financial year includes interest on the lease liability and a straight-line amortisation charge on the right-of-use asset over the life of the lease, together with any impairment of the right-of-use asset and any change in variable lease payments.

Estimates and judgements

The LAA has determined lease terms by assessing the level of certainty as to whether termination or extension options will be exercised.

The LAA has determined that the cost model is a reasonable proxy for fair value, because the rents payable are aligned to open market rates.

The LAA leases various non-property assets. It has determined that, at the present time, all non-property leases which are not individually low value are immaterial. Consequently no non-property leases have been recognised in these accounts.

o) Depreciation and amortisation

Except for assets under construction, depreciation or amortisation is provided on all non-current assets on a straight-line basis to write off the cost of assets over their estimated useful lives as follows:

  • fixtures and fittings – five years
  • furniture and equipment – three to five years
  • information technology – three to five years
  • computer software – three to 15 years
  • right-of-use assets – the life of the lease

p) Revaluation

When an asset’s carrying amount increases as a result of a revaluation, the increase is recognised in the Statement of Comprehensive Net Expenditure to the extent that it reverses a revaluation decrease of the same asset previously recognised here. Any remaining increase is credited directly to the Revaluation Reserve in the Statement of Changes in Taxpayers’ Equity. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. The net amount is restated to the revalued amount of the asset.

The revalued element, representing the difference between depreciation based on the revalued carrying amount of the asset charged to the Statement of Comprehensive Net Expenditure and depreciation based on the asset’s original cost, is transferred from the revaluation reserve to the general reserve each year.

q) Impairment of non-financial assets

At each reporting date, the LAA reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the fair value of the asset is estimated in order to determine the extent of the impairment loss.

Impairments that reflect a permanent diminution in the value of an asset, as a result of a clear consumption of economic benefit or service potential, are charged directly to the Statement of Comprehensive Net Expenditure, with any remaining revaluation reserve balance released to the general reserve.

When an asset’s carrying amount decreases (other than as a result of a permanent diminution), the decrease is recognised in the revaluation reserve to the extent that a balance exists in respect of the asset. Decreases in excess of the revaluation surplus are charged to the Statement of Comprehensive Net Expenditure.

Any reversal of an impairment charge is recognised in the Statement of Comprehensive Net Expenditure to the extent that the original charge, adjusted for subsequent depreciation, was previously recognised here. The remaining amount is recognised in the revaluation reserve.

r) Financial instruments – assets

The LAA’s financial assets comprise cash and cash equivalents, and trade and other receivables.

The LAA’s receivables are accounted for under IFRS 9 ‘Financial Instruments’ and IFRS 13 ‘Fair Value Measurement’. Gains and losses are disclosed within note 4, Expenditure under legal aid schemes.

Assets measured at fair value

Statutory charge and interest receivables are measured at fair value through the profit or loss in accordance with IFRS 13, as they are not solely payments of principal and interest, and therefore do not meet the tests set out in IFRS 9.

IFRS 13 applies the consideration of the three hierarchies set under the standard for determining fair value. This is explained in note 9. The practical application of IFRS 13 with reference to the LAA’s assets is explained in note 10, including detail regarding key assumptions which support the most significant fair value estimates set out in note 10.

Assets measured at amortised cost

The LAA recognises an impairment for expected credit losses on financial assets measured at amortised cost under IFRS 9, ‘Financial instruments’. This includes receivables from legal aid providers and clients who are not subject to the statutory charge. Subsequent to initial recognition, at fair value, these assets are carried at amortised cost using the effective interest rate method, less any impairment. Any interest receivable or loss arising on impairment is recognised in the Statement of Comprehensive Net Expenditure Derecognition.

The LAA derecognises a financial asset only when the contractual rights to the cash flows for the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

s) Impairment of financial assets

For assets held at amortised cost, IFRS 9 requires the LAA to recognise at amortised cost and to then recognise expected credit losses based on historic experience and adjusted for reasonable and supportable forward-looking information such as management’s assessment of likely recoveries. This assessment may be of individual assets (individual impairment) or of a portfolio of assets (collective impairment). An assessment of collective impairment is made of financial assets with similar risk characteristics. For these assets, the LAA’s previous experience of losses in each portfolio is used to estimate the degree of impairment on that asset class.

Where such an estimate is made, impairment provisions are made to reduce the carrying value of financial assets accordingly. The LAA apply the simplified model and recognise lifetime expected credit losses.

Further detail on the valuation models used to generate these estimates and the actual impairments against the LAA’s receivables is included in note 10, to these financial statements.

Default is determined by reference to one or more missed contractual payments but also include arrangements in place to pay less that contractual payments, fraud and bankruptcy or other indicators.

t) Cash and cash equivalents

Cash and cash equivalents comprise bank balances held with commercial banks including those administered through the Government Banking Service, with original maturities of three months or less.

u) Financial instruments – liabilities

Initial recognition and measurement

The LAA’s financial liabilities comprise trade and other payables. These are initially measured at fair value, which is their transaction price. They are subsequently valued at amortised cost, but this has nil impact due to their short maturities. The LAA is not empowered to borrow money.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

Liabilities measured at fair value

An analysis of fair values of financial instruments and further details of how they are measured is provided in Financial risk identification and management (note 9) to these financial statements.

v) Provisions

Provisions represent liabilities of uncertain timing or amount. Provisions are recognised when the LAA has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and for which a reliable estimate can be made for the amount of the obligation. Provisions reflect the best estimate of the expenditure required to settle the obligation. Where the effect is material, the estimated cashflows are discounted. The effect of discounting is charged directly to the Statement of Comprehensive Net Expenditure.

Amounts outstanding on funded cases

The LAA recognises its liability to pay for work completed by legal aid providers at the reporting date but not yet billed. Estimates for each legal aid scheme, including Civil Representation, Civil Legal Help, Crime Higher and Crime Lower are produced using available data and statistical modelling techniques. The assumptions used by management in producing these estimates are described in note 14, Provisions for liabilities and charges.

Provision for amounts outstanding in relation to privately funded cases (Central Funds)

Under the terms of the Prosecution of Offences Act 1985, acquitted defendants who have applied for legal aid and been found ineligible may, in limited circumstances, obtain an order from the Crown Court to recover their costs. The LAA estimates the value of unbilled costs to arrive at the amount disclosed in the financial statements as a provision. The amount is an estimate of the expenditure required to settle any obligation at the reporting period end date.

Dilapidations of leasehold property

Provision is made for estimated dilapidation costs on leasehold buildings. The provision has been estimated with reference to the condition and location of the buildings and the requirements of the relevant lease.

Provisions are made for costs when it is probable that an outflow of resources will be required to settle a current obligation.

w) Contingent assets and liabilities

A contingent asset is a potential asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the LAA. A contingent asset is disclosed where an inflow of economic benefits is probable.

A contingent liability is disclosed when the likelihood of a payment is less than probable, but more than remote. In addition to contingent liabilities disclosed in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, the LAA discloses, for Parliamentary reporting and accountability purposes, certain statutory and non-statutory contingent liabilities, where the likelihood of transfer of economic benefit is remote, as required by Managing Public Money.

x) Third-party assets

Deposit accounts for funded clients

Awards for damages to funded clients are initially payable to the LAA. The LAA places these funds on deposit until the final costs of a case have been calculated, when any excess of contributions and damages is paid to the funded client. These funds are accounted for as assets held on behalf of third parties and are therefore not recognised in the Statement of Financial Position.

Awards for damages paid to the LAA attract interest after a qualifying period.

Crown Court Means Testing

Contributions may be payable to the LAA towards the cost of Crown Court proceedings in those cases that have been subject to means testing. The LAA places these funds on deposit and accounts for them as funds held on behalf of third parties, therefore they are not recognised in the Statement of Financial Position. Once the final judgment and costs have been determined, if the applicant is found guilty, the value of the funds up to the cost limit are due to the LAA. If the applicant is found not guilty, contributions paid to the LAA are refunded including interest calculated at 2% per annum from the date of payment.

The movement in third-party funds is reported in Third-party assets (note 18) to these financial statements.

y) Events after the reporting period

In accordance with the requirements of IAS 10 ‘Events after the Reporting Period’, events are considered up to the date on which the financial statements are authorised for issue, which is interpreted as the date of the certificate and report of the Comptroller and Auditor General.

Note 2 – Segmental analysis

For the purpose of making operational decisions and reporting to the LAA Board, the LAA divides net operating costs into two segments: Legal Aid and Administration.

The Legal Aid Fund is further subdivided into:

  • Civil Representation – legal aid in relation to representation by barristers and solicitors in civil cases that could go to court
  • Legal Help – legal aid in relation to advice and support provided for a legal issue
  • Crime Lower – legal aid in relation to representation of those accused of criminal offences at police stations and Magistrates’ Courts
  • Crime Higher – legal aid in relation to representation in Crown Courts, the Court of Appeal and the Supreme Court
  • Central Funds – reflects spend on orders made to acquitted defendants who have privately funded their legal representation, while Administration reflects the costs of running the LAA

The following table presents the net operating cost by segment:

2024-25 2023-24
Note £000 £000
Civil Representation   861,680 841,749
Legal Help   129,024 124,537
Crime Lower   303,401 306,494
Crime Higher   934,142 867,330
Central Funds   67,658 56,189
Total Legal Aid   2,295,905 2,196,299
Administration   104,430 89,947
Net operating costs   2,400,335 2,286,246

Note 3 – Income under the legal aid schemes

2024-25 2023-24
£000 £000
Civil Representation    
Contributions by funded clients 3,126 3,041
Recoveries from damages and statutory charges 7,641 7,164
  10,767 10,205
Criminal cases    
Crown Court recoveries 38,100 23,570
Recovery of defence costs 34 19
Public Defender Service 185 202
  38,319 23,791
     
Total 49,086 33,996

Note 4 – Expenditure under the legal aid schemes

2024-25 2023-24
£000 £000
Civil Representation    
Solicitors’ charges, counsel fees and disbursements (provided in year – note 14)    
Bills submitted in year 889,654 855,219
Provision for work in progress movement (21,830) (2,639)
Refund of contributions 1,093 351
Costs of successful unassisted parties 762 489
Movement in fair value reduction for statutory charge 694 1,135
secured debt    
Movement in fair value reduction for statutory charge 930 1,207
interest debt    
Debt impairment and write offs 4,092 430
Discount of debt 851 (104)
  876,246 856,088
     
Legal Help    
Solicitors’ charges, counsel fees and disbursements (provided in year – note 14)    
Bills submitted in year 121,373 110,220
Provision for work in progress movement 271 7,187
Direct services 6,901 6,752
Debt impairment and write offs 21 (19)
Discount of debt 2 (1)
  128,568 124,139
     
Crime Lower    
Solicitors’ charges, counsel fees and disbursements (provided in year – note 14)    
Bills submitted in year 317,903 295,089
Provision for work in progress movement (22,785) 4,484
Direct services and Public Defender Service 6,321 5,143
Dilapidations provision movement 36 -
Debt impairment and write offs (89) (37)
Discount of debt (4) (2)
  301,382 304,677
     
Crime Higher    
Solicitors’ charges, counsel fees and disbursements (provided in year – note 14)    
Bills submitted in year 828,926 776,331
Provision for work in progress movement 115,874 96,528
Direct services and Public Defender Service 439 319
Debt impairment and write offs 17,546 10,858
Discount of debt 6,066 3,265
  968,851 887,301
     
Central Funds    
Central Fund expenditure (provided in year – note 14)    
Bills submitted in year 2,520 673
Defence cost orders awarded in Crown and magistrates’ courts 42,785 46,489
Provision for work in progress movement 4,331 (7,817)
Interpreters and other 18,022 16,844
  67,658 56,189
     
Sub-Total 2,342,705 2,228,394
Depreciation expense 104 94
     
Total 2,342,809 2,228,488

Note 5 – Staff and other costs

2024-25 2023-24
£000 £000
Staff costs    
Wages and salaries 43,501 41,176
Social security costs 4,346 4,122
Other pension costs 11,443 9,782
  59,290 55,080
     
Other operating expenditure    
Accommodation and related costs 2,841 2,197
Property rentals not falling within IFRS 16 169 101
Office, IT and service running costs 1,751 1,001
Staff and committee member related costs 693 543
Legal and professional costs 1,320 1,218
Service level agreements with HMCTS 85 83
Lease interest expense 99 44
Other administration costs 249 405
Non-cash costs    
Notional recharge from MoJ 33,747 28,908
Notional external audit fee 435 330
Movement in provision for legal costs and dilapidations 213 (522)
Loss on disposal of assets 11 -
  41,613 34,308
     
Depreciation, amortisation and impairment charges    
Amortisation of intangibles 5,870 5,268
Depreciation of property, plant and equipment 139 179
Depreciation of right-of-use assets 1,096 1,249
Impairment of intangibles 2,808 -
  9,913 6,696
     
Total 110,816 96,084

Note 6 – Intangible assets

Computer software Assets under construction Total
£000 £000 £000
Cost or valuation      
At 1 April 2024 91,841 (42) 91,799
Transfers from MoJ 1,960 9,745 11,705
Reclassifications 6,895 (6,895) -
Disposals (8,094) - (8,094)
Impairment - (2,808) (2,808)
Revaluation 12 - 12
At 31 March 2025 92,614 - 92,614
       
Amortisation      
At 1 April 2024 70,033 - 70,033
Charged in year 5,870 - 5,870
Disposals (8,094) - (8,094)
Revaluation 1 - 1
At 31 March 2025 67,810 - 67,810
       
Net book value at 31 March 2025 24,804 - 24,804

The revaluation reserve of £2,128,000 at 31 March 2025 includes £2,113,000 (31 March 2024: £1,958,000) relating to intangible assets.

All intangible assets are owned by the LAA.

Computer software Assets under construction Total
£000 £000 £000
Cost or valuation      
At 1 April 2023 86,876 146 87,022
Additions 6 122 128
Transfers from MoJ - 3,562 3,562
Reclassifications 3,872 (3,872) -
Revaluations 1,087 - 1,087
At 31 March 2024 91,841 (42) 91,799
       
Amortisation      
At 1 April 2023 63,954 - 63,954
Charged in year 5,268 - 5,268
Revaluations 811 - 811
At 31 March 2024 70,033 - 70,033
       
Net book value at 31 March 2024 21,808 (42) 21,766

Note 7 – Property, plant and equipment

Information technology Building fitout Furniture and equipment Assets under construction Total
£000 £000 £000 £000 £000
Cost or valuation          
At 1 April 2024 8,096 305 335 - 8,736
Additions 69 - 76 - 145
Reclassifications - 946 - - 946
Disposals - - (31) - (31)
Transfers from MoJ - - (1) - (1)
Revaluations - (70) - - (70)
At 31 March 2025 8,165 1,181 379 - 9,725
           
Depreciation          
At 1 April 2024 8,096 156 168 - 8,420
Charged in year 2 120 67 - 189
Reclassifications - (115) - - (115)
Disposals - - (20) - (20)
Revaluations - (75) - - (75)
At 31 March 2025 8,098 86 215 - 8,399
           
Net book value at 31 March 2025 67 1,095 164 - 1,326

For 2024 to 2025, Furniture and equipment has been separately classified as either Building fitout or Furniture and equipment, as appropriate.

Additions include nil capital accruals at 31 March 2025 (31 March 2024: nil).

The revaluation reserve of £2,128,000 at 31 March 2025 includes £15,000 (31 March 2024: £633,000) relating to property, plant and equipment.

All property, plant and equipment are owned by the LAA.

Information technology Furniture and equipment Assets under construction Total
£000 £000 £000 £000
Cost or valuation        
At 1 April 2023 8,004 579 479 9,062
Additions - 8 - 8
Transfers - 42 - 42
Disposals - - (479) (479)
Revaluations 92 11 - 103
At 31 March 2024 8,096 640 - 8,736
         
Depreciation        
At 1 April 2023 8,004 140 - 8,144
Charged in year - 179 - 179
Revaluations 92 5 - 97
At 31 March 2024 8,096 324 - 8,420
         
Net book value at 31 March 2024 - 316 - 316

Note 8 – Leases

Right-of-use leased assets

2024-25 2023-24
£000 £000
Cost or valuation    
At 1 April 9,763 9,653
Additions and remeasurements (164) 149
Transfers - 205
Reclassifications (946) -
Disposals - (244)
At 31 March 8,653 9,763
     
Depreciation    
At 1 April 3,048 2,043
Charged in year 1,150 1,249
Reclassifications 115 -
Disposals - (244)
At 31 March 4,313 3,048
     
Net book value at 31 March 4,340 6,715

LAA’s right-of-use leased assets are all building leases.

Lease liabilities

31 March 2025 31 March 2024
£000 £000
Not later than one year 1,472 928
Later than one year and not later than five years 1,564 5,599
Later than five years 1,490 -
Gross cash flows 4,526 6,527
Less interest element (125) (44)
Present value of obligations 4,401 6,483

An analysis of discounted cashflows relating to lease liabilities, between current and non-current, is presented in Note 13.

Amounts recognised in the Statement of Comprehensive Net Expenditure

2024-25 2023-24
£000 £000
Depreciation 1,150 1,249
Interest expense 94 47
Low value and short-term leases 169 101
Total 1,413 1,397

Amounts recognised in the Statement of Cash Flows

2024-25 2023-24
£000 £000
Repayment of principal on leases 1,962 1,295
Interest expense 94 47
Total 2,056 1,342

Note 9 – Financial risk identification and management

IFRS 7 ‘Financial Instruments: Disclosures’, requires disclosure of the role that financial instruments have had during the year in creating or changing risk an entity faces in carrying out its business.

As the cash requirements of the LAA are met through funding provided by MoJ, which is itself funded through the Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. The LAA is exposed to minimal market, liquidity or interest rate risk: exposure to financial risk is mainly in respect of credit risk in relation to receivables.

The LAA’s financial risk management process seeks to enable the early identification, evaluation and effective management of key financial risks facing the LAA. Systems have been established to review and reflect changes in the legal aid market and the LAA’s activities.

Liquidity risk

As stated above, the LAA is exposed to minimal liquidity risk. All material financial liabilities fall due within 12 months.

Interest rate risk

The LAA is not exposed to significant interest rate risk.

At 31 March 2025, £90.5 million (31 March 2024: £95.3m) of statutory charge debt was due, the principal of which carried a fixed rate of interest.

Money received by the LAA on behalf of funded clients is held on deposit until the case is concluded. Interest is paid to funded clients by reference to the London Inter Bank Offered Rate, at the rate of 0.5% per annum less the rate payable on damages on deposit in the general account.

Money received by the LAA in relation to Crown Court Means Test contributions is held until the final judgement and costs of the case have been determined. Refunds of contributions are paid to applicants that have been found not guilty including interest calculated at 2% per annum from the date of contribution receipt by the LAA. The balance of contribution monies is held as cash.

Credit risk

Credit risks arise from the LAA’s financial assets, which comprise cash and cash equivalents, trade and other receivables and other financial assets.

The LAA’s exposure to credit risk arises from potential default of a counterparty on their contractual obligations resulting in financial loss to the LAA. The LAA is exposed to credit risk when dealing with funded clients, suppliers and from certain financing activities.

Fair values

In accordance with IFRS 9 each financial asset is classified at initial recognition, or at the point of first adoption of IFRS 9, into one of three categories:

  • financial assets at fair value through profit and loss
  • financial assets at fair value through other comprehensive income
  • financial assets at amortised cost

For assets at amortised cost, the amortised cost balance is reduced where appropriate by an allowance for amounts which were considered to be impaired or uncollectible.

Financial liabilities are classified into one of two categories:

  • financial liabilities at fair value through profit and loss
  • financial liabilities at amortised cost

The LAA considers that the carrying amounts for cash and cash equivalents, trade payables and other liabilities approximate to their fair value due to the short-term maturities of these instruments.

Cash and cash equivalents comprise bank balances held with commercial banks, including those administered through the Government Banking Service, with original maturities of three months or less.

An explanation of the treatment of receivables is provided in Note 10, ‘Trade and other receivables’.

The carrying value of financial assets and liabilities is as follows:

31 March 2025 31 March 2024
£000 £000
Cash and cash equivalents 34,023 51,837
Trade and other receivables – current 37,593 51,123
Trade and other receivables – non-current 118,892 121,453
Trade and other payables – current (240,023) (215,001)
Lease liabilities – current (1,347) (928)
Lease liabilities – non-current (3,054) (5,599)
Total (53,916) 2,885

As at 31 March 2025 there were no financial guarantees or third-party obligations, other than amounts held as damages on deposit and Crown Court Means Test contributions, that increased the credit risk of the financial assets set out above.

Note 10 – Trade and other receivables

31 March 2025 31 March 2024
£000 £000
Amounts recoverable within one year    
Statutory charge 4,276 6,288
Statutory charge interest 3,957 4,998
Contributions due from funded clients 330 994
Costs to be recovered 274 285
Damages 96 100
Recovery of defence costs 4,585 5,255
Amounts due from service providers 21,590 25,739
Prepayments and accrued income 150 163
Intra-departmental debtors 1,466 3,394
Other receivables 869 3,907
  37,593 51,123
Amounts recoverable later than one year    
Statutory charge 42,127 44,391
Statutory charge interest 41,374 41,256
Contributions due from funded clients 1,219 3,337
Costs to be recovered 1,079 1,094
Damages 255 257
Recovery of defence costs 32,838 31,118
  118,892 121,453
     
Total 156,485 172,576

Under the Legal Aid Act 1974, the Legal Aid Act 1988, the Access to Justice Act 1999, and the LASPO Act 2012, where funded clients have recovered or preserved property rather than obtaining damages, recoverable costs may be secured by a charge against the property. Under the Community Legal Service (Financial) Regulations 2000 as amended by the Community Legal Service (Financial) (Amendment) Regulations 2005 and the Civil Legal Aid (Statutory Charge) Regulations 2013, some of these debts are interest bearing debts which have interest due on the outstanding balance at 8% per annum.

The income for statutory charge, statutory charge interest, contributions due from funded clients and recovery of defence costs are initially recognised under IFRS 15, ‘Revenue from Contracts with Customers’.

Valuation

The valuation of trade and other receivables includes an element of estimation.

The LAA provides for impairment of receivables based on historical cash collection experience and management assessment of likely recoveries, for each category of debt. This analysis is also used to inform the expected cash flows for trade and other receivables which are measured at fair value.

Trade and other receivables have been discounted over the period from the reporting date to the expected date of collection, to reflect the effect of the time value of money. This has a material impact on their present value. Each class of receivable is discounted over periods commensurate with historical cash flow patterns, at a rate of 2.15% nominal and -0.85% and 0.05% in excess of RPI real until February 2030 and post February 2030 respectively (31 March 2024: 2.05% nominal and -1.05% and -0.05% in excess of RPI real until February 2030 and post February 2030 respectively).

The LAA uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

  • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
  • Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly
  • Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data

All of the financial assets and liabilities measured at fair value fall within level 3.

Gross and net receivables balances, grouped by expected timing of recovery, are as follows:

31 March 2025 31 March 2024
£000 £000
Current    
Gross debt 119,953 145,598
Provision for impairment and cumulative fair value losses (82,360) (94,475)
  37,593 51,123
Non-current    
Gross debt 291,273 274,255
Provision for impairment and cumulative fair value losses (172,381) (152,802)
  118,892 121,453
     
Total 156,485 172,576

Gross and net receivables balances, grouped by component, are as follows:

31 March 2025 31 March 2024
Gross receivables Provision for impairment and cumulative fair value losses Total receivables Total receivables
£000 £000 £000 £000
Fair value through the profit and loss        
Statutory charge (secured) 67,547 (22,397) 45,150 49,031
Statutory charge interest 60,814 (15,483) 45,331 46,254
Amortised cost        
Statutory charge (unsecured) 4,109 (2,856) 1,253 1,648
Contributions due from funded clients 23,052 (21,503) 1,549 4,330
Costs to be recovered 5,149 (3,796) 1,353 1,379
Damages 2,563 (2,212) 351 357
Recovery of defence costs 194,069 (156,646) 37,423 36,373
Amounts due from service providers 51,438 (29,848) 21,590 25,739
Prepayments and accrued income 150 - 150 163
Intra-departmental debtors 1,466 - 1,466 3,395
Other receivables 869 - 869 3,907
         
Total 411,226 (254,741) 156,485 172,576

The movement in receivables in the financial year was as follows:

Held at amortised cost Held at fair value through the profit and loss Total
£000 £000 £000
At 1 April 2024 77,291 95,285 172,576
Repayment of gross fund debt (49,244) (8,911) (58,155)
New gross fund debt 53,597 4,888 58,485
Fair value adjustment of fund debt through Statement of Comprehensive net income - (781) (781)
Impairment adjustment of fund debt through Statement of Comprehensive Net Expenditure (10,660) - (10,660)
Movement in prepayments, accrued income, intra-departmental receivables and other receivables (4,980) - (4,980)
At 31 March 2025 66,004 90,481 156,485

Receivables held at fair value through profit and loss include both interest and non-interest bearing secured statutory charge debt, all other receivables are held at amortised cost.

Financial risk identification and management

The LAA has an inherent risk within trade and other receivables, as these are not predisposed to straightforward cash collections.

The LAA recognises this risk and mitigates it in the case of statutory charge debts, where enforcement of the debt may be deferred, by securing land charges and using active credit management policies to recover unsecured debts. In some cases the debt collection activities are outsourced to commercial debt collectors.

The size of the risk is reflected in the receivables impairment provision and cumulative fair value losses which total £254.7 million (31 March 2024: £247.3 million).

The majority of the LAA’s trade and other receivables are the result of a statutory charge: £90.5 million (31 March 2024: £95.3 million) out of a total receivables balance after impairment of £156.5 million (31 March 2024: £172.6 million).

A high proportion of these are secured on property and settlement is deferred until the property is sold. Secured statutory charge debt is measured under IFRS 13 and reductions in carrying value are classed as fair value adjustments rather than impairments.

The LAA provides for impairment of receivables based on historical cash collection experience and management assessment of likely recoveries, for each category of debt. This analysis is also used to inform the expected cash flows for trade and other receivables which are measured at fair value. This assumes that future performance will be reflective of past performance and there will be no significant change in the payment profile or recovery rates within each identified group of receivables. To address the risk that this assumption is incorrect, the LAA undertakes a rollback review to compare previous estimated repayment profiles with the actual experience in subsequent years, to assess the accuracy of the profile and resulting impairment, adjusting assumptions where required. There have been no material adjustments to the assumptions as a result of this review at 31 March 2025.

There is no adjustment in the impairment of the LAA’s receivables at 31 March 2025 to reflect the potential future impact of current economic circumstances. Based on the experience from previous recessions we do not consider any economic downturn would have a material impact on the fair value of receivables, and in particular secured debt, recognised in these accounts. The impact of a recession has historically resulted in a delay in the cash receipts on secured debt, due to the impact on the property market and delays to property sales which result in the repayment of the debt.

The impact of a 10% reduction in cash receipts across both secured and unsecured debt is shown below.

The LAA’s impairment model uses historical recovery profiles by debt category to estimate the provision required against debt balances. The impairment model is underpinned by specific assumptions including: the life of debt, the expected remittance profiles, and the discount rate is 2.15% nominal and -0.85% and 0.05% in excess of RPI real until February 2030 and post February 2030 respectively (31 March 2024: 2.05% nominal and -1.05% and -0.05% in excess of RPI real until February 2030 and post February 2030 respectively).

The impact of the following reasonable possible alternatives to these assumptions has been considered:

  • cash received evenly throughout the year rather than at the end of the year
  • predicted cash receipts used to calculate the impairment provision cashflows +/- 10%
  • discount rate +/-1% (this rate is set by HM Treasury)
31 March 2025 31 March 2024
Increase/(decrease) in net financial assets
Assumptions tested Assumption £m £m
Income received Evenly through the year 0.9 1.2
Expected cash inflows based on historic repayment profiles +10% 8.8 9.1
Expected cash inflows based on historic repayment profiles -10% (9.4) (9.3)
Discount rate +1% (10.5) (10.0)
Discount rate -1% 12.1 11.9
Highest change   21.8 22.2
Lowest change   (19.9) (19.3)

Assumptions are reviewed annually and changed if management believe alternative assumptions are a better reflection of the underlying trends.

Note 11 – Cash and cash equivalents

2024-25 2023-24
£000 £000
At 1 April 51,837 49,244
Net change in balances (17,814) 2,593
At 31 March 34,023 51,837

The balances were held at:

31 March 2025 31 March 2024
£000 £000
Government Banking Service 30,819 28,254
Commercial banks 3,204 23,583
Total 34,023 51,837

Note 12 – Trade and other payables

31 March 2025 31 March 2024
£000 £000
Amounts due to solicitors, counsel and advice agencies 121,664 72,970
Contribution refunds due to funded clients 2,995 2,065
Taxation and social security costs 959 902
Intra-departmental creditors 8,831 22,567
Other payables 8,753 8,852
Accruals for amounts due to solicitors, counsel and advice agencies 89,629 101,422
Other accruals 7,192 6,223
Total 240,023 215,001

All trade and other payables fall due within one year. Prior year accruals have been reclassified as either accruals due to solicitors, counsel and advice agencies, or other accruals. This reclassification is intended to improve the relevance and understandability of the information provided.

Note 13 – Other financial liabilities

31 March 2025 31 March 2024
£000 £000
Lease liabilities – current 1,347 928
Lease liabilities – non-current 3,054 5,599
Total 4,401 6,527

Further information on lease liabilities and the related right-of-use assets is provided in Note 8.

Note 14 – Provisions for liabilities and charges

Funded cases Central Funds Legal costs Dilapidations Total
£000 £000 £000 £000 £000
At 1 April 2024 935,870 20,914 230 938 957,952
Provided in year 2,229,386 47,116 249 - 2,276,751
Utilised in year (2,157,856) (42,785) (49) - (2,200,690)
Not required and written back - - - - -
At 31 March 2025 1,007,400 25,245 430 938 1,034,013
           
At 1 April 2023 830,311 28,731 353 1,293 860,688
Provided in year 2,142,418 38,672 - 97 2,181,187
Utilised in year (2,036,859) (46,489) (53) - (2,083,401)
Not required and written back - - (70) (452) (522)
At 31 March 2024 935,870 20,914 230 938 957,952

Provisions for work in progress on funded cases, by scheme category, are as follows:

Civil Representation Legal Help Crime Lower Crime Higher Total
£000 £000 £000 £000 £000
At 1 April 2024 296,252 54,647 50,780 534,191 935,870
Reclassified 186 - (186) - -
Provided in year 867,824 121,644 295,118 944,800 2,229,386
Utilised in year (889,654) (121,373) (317,903) (828,926) (2,157,856)
At 31 March 2025 274,608 54,918 27,809 650,065 1,007,400
           
At 1 April 2023 298,891 47,460 46,296 437,664 830,311
Provided in year 852,580 117,407 299,573 872,858 2,142,418
Utilised in year (855,219) (110,220) (295,089) (776,331) (2,036,859)
At 31 March 2024 296,252 54,647 50,780 534,191 935,870

The expected timings of discounted cash flows are as follows:

Funded cases Central Funds Legal costs Dilapidations Total
£000 £000 £000 £000 £000
Not later than one year 1,007,400 25,245 430 345 1,033,420
Later than one year and not later than five years - - - 470 470
Later than five years - - - 123 123
At 31 March 2025 1,007,400 25,245 430 938 1,034,013
           
Not later than one year 935,870 20,914 230 216 957,230
Later than one year and not later than five years - - - 598 598
Later than five years - - - 124 124
At 31 March 2024 935,870 20,914 230 938 957,952

Funded cases

The LAA funds legal aid across four main schemes: Civil Representation, Legal Help, Crime Higher, and Crime Lower. At any point in time there will be unbilled costs for each of these schemes, pertaining to live cases. The value of unbilled work and costs is estimated each year using complex models and based on the latest data available. The resulting work in progress (WIP) provisions are estimates of the expenditure required to settle any obligation in existence at the end of the reporting period.

As per IAS 37, ‘Provisions, contingent liabilities and contingent assets’, WIP liabilities are recognised as provisions, rather than as payables, due to the estimation uncertainty.

As all liabilities for funded cases are expected to be settled within the next 12 months, no discounting of provisions for the time value of money is applied.

In recognition of the uncertainty inherent in estimates, a sensitivity analysis is performed for each major class of funded WIP provision. Reasonable changes are made to the key assumptions in the models, and the impact on the final WIP balance calculated. Assumptions have been changed to either represent those which would have been used by the model based on historical data trends or flexed by a percentage that is considered appropriate by management to show the impact on the provision. For each assumption which is being analysed for sensitivity, only that assumption is changed: if two or more assumptions are changed at one time, the actual sensitivity of a change in assumption is obscured because of the potential interaction between the assumptions.

Overarching assumptions

Underlying the estimates of liabilities for unbilled work across all of the legal aid funding schemes, and Central Funds, is the modelling assumption that costs accrue at a constant rate throughout the lifetime of cases. This is a simplifying modelling assumption. In reality, it is accepted that costs are generally concentrated towards the beginning and the end of legal matters. The LAA have demonstrated, however, that over a sufficiently large population of cases, this concentration of costs averages out to be equivalent to the assumption used within the modelling, that costs accrue at a constant rate.

Civil Representation provision: valuation methodology

The Civil Representation work in progress provision is calculated on a case-by-case basis using past patterns of activity, with multiple potential duration and cost outcomes. The calculations are segmented between the different expenditure streams and between different milestones in a case’s lifecycle. The model estimates activity to the next financial event in each expenditure stream, reflecting the business realities of billing timing.

Civil Representation provision: sensitivity analysis

The reasonable alternative assumptions below have been arrived at by observing the maximum historical high and low points within the actual source data of the respective models, adjusted for projected future trends.

The impact of the following reasonable alternatives to these inputs has been quantified:

Increase in net financial liability (Decrease) in net financial liability
Assumptions tested Assumption £m Assumption £m
Duration profile[footnote 2] Max duration +1 year 18.5 Max duration -1 year (18.5)
Final billing duration[footnote 3] +15 days 0.9 -15 days (0.9)
Average final bill value +10% 31.7 -10% (25.6)
Profile variance[footnote 4] -10% 17.0 +10% (17.9)

The above inputs are case data driven, with an overlay of management judgement, for example choosing the number of years’ historical case data to use in creating historical profiles. It should be noted the inherent sensitivity of the civil representation WIP provision is such that relatively small percentage movements in the above inputs could lead to the estimate crystallising at a materially different amount. All assumptions are reviewed periodically to ensure they remain appropriate.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2025 could be higher by up to +18.3% (£68.1 million) or lower by up to -16.9% (-£62.9 million).

The LAA uses complex valuation models to estimate the value of unbilled amounts on live cases. Each assumption within the provision models has been identified, a reasonable change identified and the impact on the final WIP balance calculated. Assumptions have been changed to either represent those which would have been utilised by the model based on historical data trends or flexed by a percentage that is considered appropriate by management to show the impact on the provision. For each assumption that is being analysed for sensitivity, only that assumption is changed. If two or more assumptions are changed at one time, the actual sensitivity of a change in assumption is obscured because of the potential interrelation of the assumptions. Where no override to the model has been made, sensitivity of that assumption has been manually applied where appropriate.

Based on the analysis completed, the following sensitivities are to be disclosed:

Increase in net financial liability (Decrease) in net financial liability
Assumptions tested Assumption £m Assumption £m
Forecast spend[footnote 5] 2.7% 1.9 -8.7% (6.1)
Case durations[footnote 6] 6.6% 13.3 -7.7% (15.8)
Price profiles[footnote 7] 3.9% 3.5 -3.0% (2.7)

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2025 could be higher by up to +9.1% (£18.7 million) or lower by up to -12.0% (-£24.6 million).

Crime Higher: valuation methodology

The Crime Higher Graduated Fee Scheme WIP estimates are calculated by considering cohorts of case starts and modelling their progress through the legal aid system, considering when the case completes, when the work is done on the case and the different types of bills that may be incurred in order to reflect the way the scheme operates as closely as possible. A separate calculation is then done to estimate the amount that has already been paid on these cases through interim payments.

Crime Higher: sensitivity analysis

Below are the reasonable alternative scenarios modelled. These relate to the flexing of certain assumptions, such as the number of cases expected to close or the amount of time a case takes to go through the system.

Increase in net financial liability (Decrease) in net financial liability
Assumptions tested Assumption £m Assumption £m
Price profiles[footnote 8] +10.0% 57.1 -10.0% (57.1)
Completion rates[footnote 9] +2.5% 54.2 -2.5% (49.0)
Case durations[footnote 10] -10.0% 45.6 +10.0% (47.1)
Transfers[footnote 11] -20.0% 10.6 +20.0% (10.6)

Relatively small changes in these inputs could lead to a material difference in the work in progress realised. Assumptions are reviewed annually to ensure they remain appropriate.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2025 could be higher by up to +26.4% (£167.5 million) or lower by up to -25.8% (-£163.8 million).

Provision is made for legal costs associated with ongoing litigation, where it is probable that an outflow of resources will be required to settle a current obligation.

Dilapidations

Provision is made for estimated dilapidation costs on leasehold buildings. The provision has been estimated with reference to the condition and location of the buildings and the requirements of the relevant lease. The costs of the dilapidations provisions are expected to be incurred between 2025 and 2035 as each lease expires.

Note 15 – Commitments

2024-25 2023-24
£000 £000
Not later than one year 157 132
Later than one year and not later than five years 358 424
Total 515 556

Commitments include property rentals not falling within IFRS 16, and other non-property contracts.

Note 16 – Contingent assets and liabilities

At 31 March 2024, the LAA has one contingent asset in relation to costs orders from legal proceedings. While recovery continues to be pursued, due to the uncertainty over the recoverable value it is not considered practicable to quantify this asset (31 March 2024: two, unquantified).

Note 17 – Related party transactions

The LAA is an executive agency of MoJ, which is regarded as a related party. During the year the LAA had various material transactions with MoJ. The LAA has also had various material transactions with HM Courts & Tribunals Service (HMCTS), an agency of MoJ, relating to work provided by HMCTS on behalf of the LAA.

In addition, the LAA has had a number of transactions with other government departments and central government bodies. The most significant of these transactions have been with HMRC and PCSPS.

During 2024 to 2025 no board members or other related parties have undertaken any transactions with the LAA (2023 to 2024 no transactions). Compensation paid to management, including taxable benefits, is disclosed in the Remuneration and Staff Report.

Note 18 – Third-party assets

The LAA holds awards for damages and Crown Court Means Test contributions on behalf of funded clients (see note 1x).

The total third-party assets held as cash by the LAA are summarised below:

31 March 2024 Gross inflows Gross outflows 31 March 2025
£000 £000 £000 £000
Damages[footnote 12] 1,120 566 (1,111) 575
Crown Court Means Test[footnote 13] 23,352 24,933 (20,422) 27,863
Total 24,472 25,499 (21,533) 28,438

Note 19 – Events after the reporting period

In accordance with the requirements of IAS 10 ‘Events after the Reporting Period’, events are considered up to the date on which the financial statements are authorised for issue, which is interpreted as the date of the Certificate and Report of the Comptroller and Auditor General.

There are two events to report:

  • the LAA’s online digital services have been subject to a cyber attack
  • as a result, those services were taken down and are gradually being restored, with contingency arrangements in place as at the date these financial statements are authorised for issue

Cyber attack

On 23 April 2025, the LAA became aware of a cyber attack on our online digital services, through which legal aid providers log their work and make claims for payment. On discovery of the attack, external experts were appointed to carry out an investigation into the incident. Evidence of data exfiltration activities was identified, but no evidence of data modification activities was found. The LAA has carried out extensive work to assure ourselves that the data underlying these financial statements is unaffected by the incident.

Response and contingency arrangements

On 16 May 2025, we learned that the cyber attack was more extensive than originally thought and that the attackers had accessed a large amount of information relating to legal aid applicants. Customer facing and internal processing systems were therefore taken down and, while some systems have since been restored or part-restored, contingency measures remain in place.

Contingency measures include the payment (on provider opt-in) of temporary average payments for Civil Representation work that would otherwise be due for payment, and enhanced delegations to providers to enable applications for civil and criminal legal aid to be processed without significant delay. Where appropriate, Parliamentary or HM Treasury approval has been obtained prior to the implementation of these measures.

We have reviewed the impact of these measures on our assets and liabilities at 31 March 2025 and our results for 2024 to 2025. As a result of this review, three intangible assets have been disposed of as at 31 March 2025: these assets will not be brought back online, and are being replaced with new, more secure, applications. The disposed of assets were fully amortised at 31 March 2025, and therefore there is no financial loss to report in 2024 to 2025. No other impact on the 2024 to 2025 financial statements has been identified.

The LAA has worked to ensure that those most in need of legal support can continue to access the help that they need, and to provide financial support to legal aid providers. The contingency measures in place will impact on the results reported for 2025 to 2026, however, we are at present unable to estimate the financial effect. We have received pre-action letters in relation to possible claims for damages as a result of the cyber attack.

Footnotes

  1. For more information see: www.ons.gov.uk/news/statementsandletters/pausingofproducerpricespublications ↩

  2. Duration profile: In order to estimate the provision, profiles outlining the timing and magnitude of costs on civil representation cases are calculated. There is a degree of uncertainty in the calculation of these profiles, particularly due to the inherent time lag. We therefore make the assumption that the level of variance could be equal to the variance if this year's profile was extended by 1 year. We have assumed a this degree of variance can be seen in either direction. ↩

  3. Final billing durations: It can take some time for Legal Aid providers to compile and submit their bills to us once work has completed on a case. The estimate of the provision assumes that the average delay will be equivalent to that seen in the preceding quarter, however, this does vary to a small degree over time. We therefore make the assumption that this delay could vary by up to 15 days in either direction. ↩

  4. Profile variance: In estimating the provision, we have made an adjustment to calculated billing profiles to account for recent changes in value and billing duration. These adjustments are based on emerging trends and therefore are subject to some uncertainty, which this variance represents. ↩

  5. Forecast spend: only for those estimates driven by forecast expenditure. There is an inherent level of uncertainty in the expenditure forecast used to derive the provision estimate. The potential level of variance is derived through an assessment of the accuracy of prior forecasts in the relevant area. ↩

  6. Case duration: there is a degree of uncertainty in assuming that case durations and billing delays will follow historical patterns, as they vary to a small degree over time. Sensitivity to this assumption has been reflected through assuming that durations could be as high as the maximum 3-month mean from the preceding 12-month period, or as low as the minimum 3-month mean from the preceding 12-month period. ↩

  7. Price profiles: there is a degree of uncertainty in assuming that future prices will follow historical patterns, as prices vary to a small degree over time. The sensitivity analysis considers that prices could vary by as much as the maximum monthly variance from the mean over the preceding 12-month period, or that they could take a value derived as the mean of a longer or shorter period. ↩

  8. Price profiles: there is a degree of uncertainty in assuming that future prices will follow historical patterns, as prices vary to a small degree over time. The sensitivity analysis considers that prices could vary by as much as 10% in either direction. ↩

  9. Completion rates: a number of representation orders never attract a bill, and so do not close. The model uses historical data to determine the likely proportion that these cases represent of the live case population. There is inherent uncertainty in assuming that the proportion will be similar to that seen historically, which this sensitivity represents. The proportion is flexed by 2.5% in either direction, representing the variance that we see in the proportion over time. ↩

  10. Case durations: the estimate of the provision assumes that average case durations will be consistent with those seen in recent prior periods, however, durations do vary to a small degree over time. We therefore make the assumption that durations could vary by up to 10% in either direction. ↩

  11. Transfers: an adjustment has been applied to the provision model at Q4 to account for the fact that a proportion of subsequent payments relate to transferred cases, rather than redeterminations. This sensitivity assumes that the proportion of subsequent claims that fall into this category could vary by as much as 20% from historical levels. ↩

  12. The LAA receives awarded damages awaiting the final settlement of a case and contributions from clients towards legal costs. ↩

  13. The LAA receives contributions towards costs awaiting the final judgment and calculation of the total costs of the case. The outcome of the case will determine whether the third-party asset transfers to the LAA or is returned to the third party. ↩

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