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The Solicitors Regulation Authority has warned law firms under financial pressure against becoming involved in schemes that “manage” the ban on referral fees or promote “improper” ways to avoid stamp duty land tax.

Law firms will be held responsible for breaching the personal injury referral fee ban if they sign up to ventures that appear to be genuine joint marketing schemes but prove illegal, the Solicitors Regulation Authority has warned. It will also target senior individuals within firms that “recklessly trade into insolvency”.

Insurance companies will buy law firms in response to the ban on referral fees, but this will not help to lower the industry’s claims bill, an analyst has predicted. An investor report on Admiral Group, produced by Investec, said the referral fee ban will cost the company £7 of income per vehicle.

The Solicitors Regulation Authority is confident of its interpretation of the referral fee ban but simply cannot give the level of clarity over which business models will comply that many want, the official leading the work said yesterday.