A new charge, the Economic Crime (Anti-Money Laundering) Levy (‘the levy’), is to be introduced from 1 April 2022.
What is its purpose?
This annual levy is being introduced to fund the economic crime plan – the government’s strategy to tackle economic crimes such as fraud, money laundering, terrorist financing and bribery and corruption. The aim is to raise around £100m per annum.
Economic crime represents a significant threat to the UK, with fraud alone accounting for almost a third of all crime experienced by individuals, and serious and organised crime being estimated to cost the UK more than £37 billion each year. Stemming the flow of finance involved in such crime, including drug dealing and human trafficking, is of high priority for the UK’s banking and finance sector.
This economic crime plan is the first plan to outline how both the public and private sectors will work together to tackle these issues.
Who will pay the levy?
The levy will be payable by persons who are subject to the Money Laundering Regulations (MLRs), 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; and
- cryptoasset exchange providers and custodian wallet providers.
This covers all types of businesses who are subject to the MLRs, including individuals, partnerships and companies. For the purposes of this levy, these regulated businesses will be divided into four size brackets, with revenues appropriately proportioned for accounting periods of fewer than 12 months:
- small (under £10.2m UK revenue)
- medium (£10.2m – £36m)
- large (£36m – £1bn)
- very large (over £1bn)
All small businesses will be exempt from this charge.
How much will it be?
The amount payable under the levy depends on which band the business falls into. Within each band the charge will be fixed, with medium businesses paying £10,000, large businesses £36,000, and very large businesses £250,000.
The charge will be proportionately reduced where a business carries on a regulated business for only part of the levy year.
No deduction is available for amounts 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 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 that which is attributable to activities of any permanent establishment in the UK.
When will the first payment be due?
The levy will first be collected in 2023/24 (being 1 April 2023 to 31 March 2024) but will be based on the business’ size/revenue reported in the period of account of the business ending in 2022/23.
How will it be collected?
The charge is to be collected by three ‘collection authorities’: the Financial Conduct Authority, the Gambling Commission, and in any other case, by HM Revenue & Customs. Further details about assessment, payment, collection and recovery are to be published in regulations in due course.
The levy will be reviewed by the end of 2027.
What actions are necessary now?
If you believe your business may need to pay the levy please make contact with PEM so we can ensure that we update you when further details of the process for assessment and collection are released.