Updated: 13 July 2023
HMRC have recently updated their guidance on the Economic Crime Levy (‘ECL’). This annual levy has been introduced to fund the Economic Crime Plan – the government’s strategy to tackle economic crimes such as fraud, money laundering, terrorist financing, bribery and corruption – and is aimed at businesses who are supervised under the Money Laundering Regulations and whose UK revenue is at least £10.2 million a year.
Who will pay the levy?
The Economic Crime Levy will be payable by businesses who are subject to the Money Laundering Regulations (MLR), which include:
- Credit institutions
- Financial institutions
- Auditors, insolvency practitioners, external accountants, and tax advisers
- Independent legal professionals
- Trust or company service providers
- Estate agents and letting agents
- High value dealers, casinos, auction platforms and art market participants
- Cryptoasset exchange providers and custodian wallet providers
This covers all types of businesses who are subject to the MLR, including individuals, partnerships and companies. For the purposes of the ECL, these regulated businesses are divided into four size brackets according to their UK revenue, with UK revenue appropriately proportioned for accounting periods of fewer than 12 months. These annual size brackets and corresponding ECL charges are as follows:
|ECL Band (UK Revenue)||ECL charge|
|Small (Less than £10.2 million)||£nil|
|Medium (£10.2 million to £36 million)||£10,000|
|Large (£36 million to £1 billion)||£36,000|
|Very Large (More than £1 billion)||£250,000|
In cases where a business only operates regulated trading for part of the financial year, the charge will be proportionately reduced.
No deduction is available for the ECL charge paid for the purposes of calculating the business’ profit, or loss subject to income tax or corporation tax.
What is UK revenue?
Where a business is UK resident, its UK revenue is considered as all revenue after deducting, on a just and reasonable basis, the amount attributable to any permanent establishment based outside of the UK.
For businesses which are resident outside of the UK, the business’ UK revenue is counted as that which is attributable to activities of any permanent establishment in the UK.
Revenue is turnover plus any other amounts which are recognised as revenue in the profit and loss account prepared under generally accepted accounting practice. However, distributions from connected companies are ignored in determining the business’ revenue.
When will the first payment be due?
The Economic Crime Levy must be paid by the 30 September each year. The first payment (‘first year levy’) is due on the 30 September 2023 and will be based on the business’ UK revenue reported for their accounting period ending in the financial year from 1 April 2022 to 31 March 2023. HMRC will publish more details about paying the ECL later in 2023.
How will it be collected?
The Economic Crime Levy is to be collected by three ‘collection authorities’: the Financial Conduct Authority, the Gambling Commission, and HMRC. Businesses will only need to provide information to, and pay, one collection authority, even if supervised under MLR by more than one supervisor. HMRC will be responsible for collecting the ECL from their own MLR-supervised businesses and any in-scope businesses not already supervised by the Financial Conduct Authority or the Gambling Commission.
Registering for the ECL
In-scope businesses that are either supervised by HMRC for MLRs or by one of the professional body supervisors listed here must register for the ECL online with HMRC, submit an annual online return and pay the amount due by the 30 September following the end of the relevant financial year.
HMRC’s registration portal is now open and can be accessed here. Businesses will need to sign in with their Government Gateway user ID to complete the registration process. There is an option to create a Government Gateway account if you do not have an existing login. After completing the registration process, the business will be provided with a reference number starting with ‘X’.
In-scope businesses will only need to register for the ECL once but will need to submit an online return and pay the ECL for every year that their UK revenue is great than or equal to £10.2 million. Tax agents will not be able to complete the registration process on behalf of their clients.
Businesses are not required to register with HMRC if they are already supervised by the Financial Conduct Authority or the Gambling Commission or if their UK revenue is below £10.2 million in the relevant financial year. Businesses that are supervised for MLR’s by the Financial Conduct Authority or the Gambling Commission will need to follow their supervisors ECL process.
The Economic Crime Levy return
Registered businesses whose collection authority is HMRC can now submit the ECL return for the year ended 31 March 2023 online here. The return must be submitted the 30 September 2023.
You will need to provide the following information when submitting the return:
- The length of your relevant accounting period
- Your UK revenue for that accounting period
- Whether you stopped or started MLR-regulated activities during the year ended 31 March 2023
- Your ECL band and amount due
If you have registered for the ECL, you should submit returns on a yearly basis, even if you do not meet the threshold for paying the ECL in that year.
HMRC may impose penalties for a variety of compliance failures on a business liable to pay the levy, as detailed in the table below:
|Failure to submit return by due date||£250|
|Failure to submit return 3 months after due date||A further penalty of 5% of ECL due|
|Failure to pay ECL by due date||£250|
|Failure to pay ECL 30 days after due date||A further £250|
|Failure to pay ECL 3 months after due date||A further penalty of 5% of ECL due|
|Failure to keep and preserve records||Up to £3,000 as determined by HMRC|
|Submission of incorrect return||£250 or 5% of additional amount due|
|Failure to notify HMRC of under-assessment||£250 or 5% of additional amount due|
|Failure to notify HMRC of amount repaid in error||£250 or 5% of amount repaid in error|
If you believe your business may need to pay the ECL, contact PEM and we can ensure that we update you when further details of the process of online registration, assessment and collection are released. You can either reach out to us using our contact form or by calling on 01223 728222.