Do not penalise solicitors because of financial crime

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Plans to hit the legal profession with a levy, when they are already devoting resources to preventing the system from being abused by money launderers, have prompted solicitors’ leaders to warn of an unjustified negative impact on the sector.

In particular, the Law Society of England and Wales warned in its response to a government consultation that a levy calculated on firms’ income could be harmful to the profession. 

“The legal profession is fully committed to supporting the fight against economic crime and takes their anti-money laundering responsibilities very seriously,” said outgoing Law Society president Simon Davis.

“Law firms already play an important role in tackling money laundering, as demonstrated by the substantial costs and resources allocated by the profession to comply with its anti-money laundering (AML) and financial crime obligations.

“The imposition of the levy is a special tax on the legal profession.

“Further increasing the costs of doing business impacts the competitiveness of the UK legal sector, and the willingness of law firms to invest in the UK.

“This is compounded by the COVID-19 pandemic, which has seen large parts of the profession take measures to keep their firms running, while simultaneously preparing for the end of the Brexit transition.”

Any levy based on income would be especially harmful to the profession, as basing it on revenue confuses it with the scale of the risks it is intended to protect.

If the levy is to go ahead, a calculation-based model based on the number of suspicious activity reports (SARs) which a firm submitted the previous year would be simple, cheaper and fairer than a revenue-based levy.

An exemption should also exist for small firms with a revenue of under £10.2 million a year. It is also essential that the levy is based on domestic revenue generated by AML-related activity only.

“With the UK in recession, the predicted future state of the economy being so uncertain and the legal sector already struggling in so many areas, imposing a tax on the profession is an unjustified step too far,” said Simon Davis.

Notes for editors

The economic crime levy was announced by the government at the 2020 Budget in March.

The government hopes to introduce it by 2022/23 and is looking to raise £100 million a year.

Research unveiled by the Law Society in May found that 71% of high-street firms may have to close their doors in the next six months as a result of the crisis.

The survey was sent to the 7,958 small firms, including sole practitioners. The results are based on the 774 responses received (10% of small firms). They are defined in this survey and generally as those with four or fewer partners.

Suspicious activity reports alert law enforcement to potential instances of money laundering or terrorist financing. They are made by financial institutions, solicitors, accountants and estate agents, and are used as a source of intelligence on economic crime and criminal activity.

Read our consultation response in full

About the Law Society

The Law Society is the independent professional body that works globally to support and represent solicitors, promoting the highest professional standards, the public interest and the rule of law.

Press office contact: Naomi Jeffreys | Naomi.Jeffreys@lawsociety.org.uk | 020 8049 3928

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