The Economic Crime Levy, a new tax on medium and large professional firms and financial institutions, was announced in the 2020 Budget. It will apply to the anti-money laundering (AML) regulated sector as defined within the Proceeds of Crime Act 2002, which includes lawyers, accountants, insurance companies and banks.

Those captured by the levy will be required to pay an annual fixed fee based on the turnover ‘size’ band that they belong to. Firms determined to be small (under £10.2 million in UK revenue) will be exempt.

The levy will first be collected in 2023/24, with liable entities paying based on their UK revenue reported in the accounts year ending in 2022/23.

Firms captured by the levy will be required to pay an annual fixed fee based on the turnover ‘size’ band that they belong to, determined by their UK Revenue, with fees increasing by size. Those firms determined to be small will be exempt.

The levy is intended to raise approximately £100 million per annum to help fund AML reforms. Its collection, from 2023/24 (April 2023-September 2023), will be the responsibility of HMRC, the Financial Conduct Authority and the Gambling Commission.

All entities subject to the Money Laundering Regulations (MLRs) and with UK revenue over £10.2 million will be subject to the levy.

The fixed fee levy to be paid by entities will be based on their UK Revenues, according to their size – medium (£10.2 million to £36 million); large (£36 million to £1 billion); and very large (more than £1 billion) sized entities.

An in-scope entity will pay a fixed fee based on the UK revenue it has made during its period of accounts that end in the levy year.

The level of fixed fees will be included in the Finance Bill, although the government has published some illustrative fixed fee ranges in their response to the draft legislation. Medium entities will likely pay an annual fixed fee of between £5,000 and £15,000, large entities a fee between £30,000 and £50,000, and very large entities a fee between £150,000 and £250,000.

For a UK resident entity, revenue is all of the entity’s revenue, less revenues attributable to permanent establishments outside the United Kingdom. The draft legislation refers to a Generally Accepted Accounting Practice (GAAP), so could be UKGAAP or International Financial Reporting Standards (IFRS).

The government has held a short technical consultation, which ended on 15 October, to get views on the policy detail, including the proposed definition of UK Revenue.

Each ‘levy year’ will run from 1 April to 31 March and the first levy year will begin on 1 April 2022.

The levy will be collected by the three statutory AML supervisors – HMRC, the FCA and the Gambling Commission, and entities will be required to make their levy payments within six months of the end of each levy year. For example, in the first levy year (2022/23) entities will need to pay the levy at a point in the period 1 April 2023 to 30 September 2023 to be determined by their supervisor.

No. The draft legislation specifically stipulates that the levy is not to be a tax-deductible expense.

Your firm’s revenue for the accounting year ending in 2022/23 will determine its size and therefore the initial levy.

• Do your systems allow you to identify and distinguish between UK and Non-UK Revenues?
• Entities with revenues near threshold limits may fall in/out of scope, or have substantial changes in the levy suffered. (£10.2m; £36m; £1bn) These will need to be monitored, especially for those with a 31 March year-end as they will have little time to determine their revenue and thus levy
• The levy will apply an entity level rather than group basis