In a strategic move to fortify the UK’s financial landscape against the increasing threat of economic crime, the government has introduced the Economic Crime Levy (ECL).
A number of our clients and intermediaries were unaware of this significant development, so we’ve put together the key points to consider – and what to do if you could be affected.
What is the Economic Crime Levy?
The ECL is part of the government’s wider objective to develop a long-term sustainable solution to tackle economic crime. This means that entities regulated for anti-money laundering (AML) face additional compliance obligations.
What sectors are impacted?
The ECL is likely to impact a number of sectors, including financial institutions, accountants, legal firms and estate agents amongst other professionals. Entities falling within the remit of the ECL should have filed their first return and made their first payment for the financial year 2022-23, which was due by 30 September 2023.
Understanding the charge
The ECL, an annual financial contribution, serves as a critical instrument in the collective fight against money laundering and fraud. Whether you’re in scope of the ECL is determined by the UK turnover of the entity, the fixed fee levy ranges from £10,000 for medium-sized businesses to £250,000 for very large corporations. Those small entities with UK turnover of under £10.2 million will be exempt.
Where an entity is part of a group, the ECL will only apply to entities within the group who meet the requirements. Each group member who meets the requirements must register, submit yearly returns and pay separately.
For partnerships, if the levy is applicable, the nominated partners must make an ECL return in the name of the partnership.
Defining UK revenue
A pivotal factor in ECL calculations is the determination of UK revenue. This encompasses all revenue generated within the UK, providing a holistic view of an entity’s financial footprint within the UK national borders. An entity must consider its entire UK revenue in accordance with UK generally accepted accounting principles (GAAP); it’s not simply the turnover of the activity supervised for AML regulations. The fee is based on the UK revenue in the accounting period ending in the previous financial year.
Entities falling within the remit of the ECL are obligated to initiate a compliance journey, which starts with registration, completing an annual submission and finally payment. The first step must begin with registration with the relevant body, in most cases HM Revenue & Customs (HMRC), to ensure adherence to regulatory standards. Once you’ve registered, you’ll receive an ECL registration number for your annual submission form.
Key dates to consider
The inaugural year for ECL applications is for the financial year from 1 April 2022 to 31 March 2023 (2022-23). After registration, entities are required to submit an annual return each year, detailing their financial activities. The annual return is required to be submitted online and is due by 30 September following the financial year eg for 2022-23 by 30 September 2023.
The levy payment is also due by 30 September each year, covering the preceding financial year.
How we can help
If you’d like to discuss any of the above or need help with ECL compliance obligations, please get in touch with Tom Alun-Jones.