If you haven’t heard about the Economic Crime Levy (ECL), you may be in for a surprise: it covers a range of entities – and it’s imminent.

The essentials

What is it?

The ECL is an annual charge on entities (not just companies) which:

• are supervised under the Money Laundering Regulations; and
• have annual UK revenue of more than £10.2 million.

What do affected entities have to do?

Once only:

• Register for the ECL

Annually:

• Submit a return
• Pay a fee

When is it happening?

The deadline for registration, submitting the return and paying the fee is 30 September 2023.

How much is the fee?

It’s based on the level of UK revenue:

• £0 – £10.2m: £nil
• £10.2m – £36m: £10,000
• £36m – £1bn: £36,000
• > £1bn: £250,000

Some of the details

The levy was announced in the 2020 Budget and aims to raise approximately £100 million

a year to help fund new and uplifted anti-money-laundering and economic crime measures.

Entities covered

The ECL applies to any individual, company, LLP or responsible partner in a partnership where that entity has been supervised under the Money Laundering Regulations at any point in the financial year ended 31 March 2023.

Broadly, this means all firms or individuals supervised by the Financial Conduct Authority or the Gambling Commission and anyone with anti-money laundering compliance regulated by HMRC.

The types of business affected would include:

1. Credit institutions
2. Financial institutions
3. Accountants and tax advisors
4. Legal professionals
5. Estate and letting agents
6. High value dealers, casinos, auction platforms and art market participants

Groups are effectively ignored as far as the ECL is concerned. Only the entities within a group that meet the requirements are covered, and each entity is responsible for its own registration and payment.

Where the person liable to pay the levy is the responsible partner of a partnership, they must make a return in the name of the partnership.

Note that tax agents are not able to register, submit returns or make payments on behalf of their clients – clients must undertake the process themselves.

Once you have registered, and assuming you still carry out MLR-regulated activity, you will need to continue submitting returns even if you no longer meet the revenue threshold.

Registration

Those covered by HMRC must register using its online ECL service at https://www.tax.service.gov.uk/register-for-economic-crime-levy. The Financial Conduct Authority and the Gambling Commission have their own registration and payment processes.

Revenue measurement

The assessed revenue comprises the firm’s UK turnover for the accounting period that ended in the 12 months to 31 March 2023. Partial years are treated proportionately, so:

• If the entity’s accounting period that ended in the year to 31 March 2023 is shorter than 12 months, the turnover bands are reduced accordingly.
• If the entity carried out supervised activities during only part of the year to 31 March 2023, the levy is reduced proportionately.
• Where there are more than one accounting periods in the financial year, the revenue from these is added and then reduced proportionately to give a 12-month equivalent.
• If the entity did not have an accounting period ending in the year but does have an accounting period that ended on or before 30 June 2023, the turnover for that accounting period must be used.

Tax

The fees payable under the ECL are not tax-deductable.

Penalties

Financial penalties are payable for a range of failures, including failure to file a return or pay the levy by the due date. Penalty amounts can be fixed, starting at £250, or 5% of the amount owed but not paid, although these can be nullified if there is a reasonable excuse.

Summary

HMRC is unlikely to accept ignorance of the law as a reasonable excuse, so with the deadline looming, you need to take action now determine whether or not you’re subject to the ECL. And if you are and you want to avoid possible penalties, you must register, submit your return and pay the fee by 30 September.

If you need any assistance in the process, please contact us.

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