Economic crime costs the UK economy an estimated £14.4 billion per year.
That’s according to the UK government.
The aim of the Economic Crime Levy, which will be paid by the anti-money laundering (AML) regulated sector, is to raise £100m a year to help fund the work of the new Economic Crime Centre.
Its objective is to tackle economic crime as the government intended in its 2019 Economic Crime Plan.
In this article, we explore everything you need to know about the Economic Crime Levy, whether you’re an accountant or business owner, including who is affected by the new levy, how the levy is calculated, and the process for registration and payment.
Here’s what we cover:
- What is the Economic Crime Levy and who needs to pay?
- When does the Economic Crime Levy start?
- How the Economic Crime Levy is calculated
- What the levy means for accountants
- What the levy means for businesses
- Registering for the levy
- Submitting returns and making payment to HMRC
- Final thoughts
What is the Economic Crime Levy and who needs to pay?
The Economic Crime Levy or ECL is an annual charge that must be paid by all individuals, companies and partnerships who:
- Are supervised under the Money Laundering Regulations (MLR), and
- Whose UK revenue exceeds £10.2m per year
Anti-money laundering regulated businesses include:
- Credit and financial institutions
- Tax advisers
- Insolvency practitioners
- Accountants in practice
- Independent legal professionals
- Estate and letting agents
- Trust or company service providers
- Crypto asset exchange providers and custodian wallet providers
- High value dealers
- Auction platforms
- Art market participants.
A regulated business can be supervised by the following three authorities:
- Financial Conduct Authority (FCA)
- The Gambling Commission (GC)
It’s important to know which authority the business is supervised by as this will determine how they pay the Economic Crime Levy.
When does the Economic Crime Levy start?
The levy must be paid each year by 30 September.
The first tax year is 6 April 2022 to 5 April 2023, so for entities that were supervised for Money Laundering Regulations at any time during this period, the first payments will be due by 30 September 2023.
Late payment could incur additional interest and penalties.
How the Economic Crime Levy is calculated
The Economic Crime Levy will be an annual-fixed fee.
The amount a business needs to pay will depend on which ECL revenue band they fall into, based on their annual UK revenue for the previous financial year.
The four band sizes:
Small – under £10.2m
Medium – £10.2m to £36m
Large – £36m to £1bn
Very large – over £1bn
UK revenue is defined as the organisation’s turnover for the accounting period, plus any other income recognised as revenue in the profit and loss or income statement, in accordance with UK GAAP.
This means it includes all UK revenue, not just the turnover from the activity supervised for Money Laundering Regulations.
Small – No liability
Medium – £10,000
Large – £36,000
Very large – £250,000
There are two scenarios where the fixed levy may be reduced:
- Where an organisation was only carrying out regulated activities for part of the financial year. The reduction is calculated using a daily apportionment of the time the entity was supervised by MLR.
- Where the accounting period is shorter than 12 months, the band sizes are adjusted by calculating the apportionment using days.
What the levy means for accountants
As an accountant, you’re required to register and pay the Economic Crime Levy. This is due to the fact that your practice is subject to Money Laundering Regulations.
Remember, if you don’t pay by 30 September, you could be charged interest on the levy and may also have to pay a penalty.
So it’s important to take steps now to ensure your practice is registered and pays the levy by the deadline.
Additionally, some of your clients may not be up to date with the requirements, so you should be ready to support them, while also reaching out to those clients who are required to register for the Economic Crime Levy as soon as possible.
It’s a good idea to assist your clients in completing their annual returns because if they supply incorrect information and it affects the band size they fall into, they’ll end up paying the wrong levy.
What the levy means for businesses
If your business is monitored under the Money Laundering Regulations, the first step is to check which authority it’s supervised under, as this will determine the ECL registration and payment process, which we discuss further below.
It’s worth asking your accountant to assist with your business’s UK revenue information to ensure all necessary income has been captured according to the levy requirements.
It’s important to remember that once a UK business is registered, you may need to submit an annual return even if the company’s UK revenue puts it in the small band size (meaning there is no liability to pay).
Registering for the levy
Not all businesses will have to register and submit a return, as it depends on the collection authority responsible. Let’s take a look at each authority’s process.
Financial Conduct Authority registration
Those businesses who were registered for anti-money laundering supervision by the FCA between 6 April 2022 and 5 April 2023 will see the new levy appear on their invoices from July 2023.
In order for the FCA to ensure businesses are charged the correct amount according to their UK revenue, all impacted businesses must submit their financial data via the new ‘Reg Data Report’ (FIN074).
The Gambling Commission (GC) registration
The Gambling Commission is responsible for collecting the levy from licensed casino operators.
Operators need to complete a return that will report the following details:
- The length of relevant accounting period
- UK revenue for that accounting period
- ECL band and amount due.
Returns need to be submitted on a yearly basis, even if the operator doesn’t meet the threshold for paying the ECL in that year (a Nil Return).
The Gambling Commission will provide operators with the details of how to submit a return. Here is the Gambling Commission’s bank details to pay the levy.
A tax agent can’t register for the ECL on an organisation’s behalf, the business must register themselves. The business only needs to register for the Economic Crime Levy once, but will need to submit a return and pay the levy on an annual basis.
A business only needs to register if their UK revenue is £10.2m or more in a financial year (1 April to 31 March).
The business must register before they can submit a return and pay the levy, so it’s best to do this as soon as possible before the 30 September payment deadline.
If the payments aren’t made by 30 September, the entities will incur interest on the ECL and HMRC may also charge late payment penalties.
Here’s the info you will need to register for the Economic Crime Levy:
- UK revenue for the past financial year
- The date anti-money laundering-regulated activities started, if it was during the past financial year.
- The business sector the organisation operates in
- The length of the organisation’s accounting period
- Contact details of someone within the business, including name, role, email address and telephone number
- Company/partnership/charity registration number
- National Insurance number, if you’re a sole trader
- Unique Tax Reference
Registration must be done online through the HMRC online service if the organisation is supervised by HMRC. Sign in with the Government Gateway user ID and password of the person or entity who is completing the registration.
Submitting returns and making payment to HMRC
HMRC is responsible for collecting the levy from qualifying entities supervised by one of 22 professional bodies. You can find them on the Gov.uk website.
The return will cover the financial year from 1 April to 31 March of the following year and the return must be submitted by 30 September each year.
Here’s the info you will need to submit a return for an organisation:
- The relevant accounting period
- UK revenue for the relevant accounting period
- If you stopped or started anti-money laundering-regulated activities, how long you carried out these activities for
- The name, role and contact details of the person completing the return
To submit a return, use the online service and sign in with the Government Gateway user ID used to register for the ECL.
Once an entity has submitted their return, they’ll be able to pay their ECL liability online in the same way as you would normally pay any other tax liability.
Why has the Economic Crime Levy been introduced?
The levy has been introduced to tackle the rising problem of economic crime in the country, such as fraud, money laundering, and bribery.
The levy will be used to fund the work of the new Economic Crime Centre, which has been set up to investigate and prosecute economic crime.
Does my business have to pay the Economic Crime Levy?
If your business was supervised under the Money Laundering Regulations by either HMRC, the Financial Conduct Authority or the Gambling Commission between 1 April 2022 and 31 March 2023 AND your UK revenue exceeded £10.2m for the accounting period that ended in the year, then you must pay the levy according to the band size your business falls under.
Is the Economic Crime Levy tax-deductible?
No, the Economic Crime Levy is not a deductible expense for tax purposes.
Who are the collection authorities?
The three collection authorities for the Economic Crime Levy are:
- Financial Conduct Authority (FCA)
- The Gambling Commission (GC)
As an accountant, you’ll be spending a lot of time supporting your clients. But in this case, the Economic Crime Levy is something you need to prioritise for your practice.
You need to ensure you submit the correct information and pay the levy by the 30 September deadline. So don’t delay and take steps now to make sure you avoid being penalised by HMRC.
Additionally, business owners will be turning to you for support with their levy requirements too.
And if they haven’t contacted you, use this as an opportunity to check in with those clients in the anti-money laundering regulated sector and clear up any confusion they may have about the levy or their obligations.
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