Following the announcement at the 2020 Budget of the introduction of a new economic crime levy, draft legislation has now been published and is open for technical consultation.
The levy represents one part of the government's long-term sustainable resourcing model to help fund new action to tackle money laundering and ensure delivery of the reforms committed to in the 2019 Economic Crime Plan. As the levy is intended to fund government action and initiatives to tackle money laundering, the levy will only apply to those entities that operate in the anti-money laundering regulated sector with the levy being collected by the appropriate supervisory body for that entity; HMRC, the FCA or the Gambling Commission.
The amount charged will be based on UK revenue depending on whether the entity is considered medium (UK revenue of between £10.2 million and £36 million), large (UK revenue of between £36 million and £1 billion) or very large (UK revenue of more than £1 billion). This means that small entities (those with UK revenue below £10.2 million) will not be subject to the levy. These categories are largely based on how entities are categorised in the Companies Act 2006 and how companies prepare their accounts, with the exception of the 'new' category of very large companies, however, the draft legislation is not restricted to companies and so regulated partnerships and sole-traders will also be subject to the levy, if they meet the other criteria.
The amount of the levy will be a fixed fee which is yet to be confirmed. However, the draft legislation indicates that the levy is likely to be between £5,000 and £15,000 for medium entities, between £30,000 and £50,000 for large entities and between £150,000 and £250,000 for very large entities. The levy will be chargeable for every 12 month period beginning on 1 April with the first charge due to be following the year 1 April 2022 to 31 March 2023. The government has stated that it intends to undertake a review of the levy by the end of 2027 and the amount of the levy will part of that three year review.
Whilst the details of the timing and deadlines for payment and any related returns have not been published, and will be dealt with via regulations, businesses will be aware that the levy represents yet another compliance burden as well as a cost. Businesses should, therefore, now review whether their business, or any part of their business, operates in the anti-money laundering regulated sector in preparation.
Please contact our expert tax team or your usual DWF contact to understand how this new legislation affects your business.
Authors: James Collinson and Caroline Colliston