Economic crime levy: small firms exempt, but it is an unnecessary burden on the profession
News small law firms will be exempt from the UK government’s economic crime levy has today been welcomed by the Law Society of England and Wales but the organisation warned the levy will still have an unjustified and negative impact on legal services.
Law Society president I. Stephanie Boyce said: “The legal profession is at the forefront in supporting the fight against economic crime and takes its anti-money laundering responsibilities very seriously.
“On principle, we have strongly opposed the imposition of the levy from the start and are disappointed the UK government has decided to moved forward with it.
“Law firms play an important role in tackling money laundering, as demonstrated by the substantial resources allocated by the profession to comply with its anti-money laundering (AML) and financial crime obligations.
“The levy effectively represents a tax on the provision of legal services, undermining the competitiveness of a key British industry at a time when the sector should be championed.
“Imposing a levy based on a firm’s revenue is an arbitrary measure, and means there is no link between the amount a business is required to pay and the extent of the risk it brings into the system.
“As for the firms that will pay the levy, we are concerned that the three bands proposed – medium (£10.2m to £36m), large (£36m to £1bn) and very large (over £1bn) – are very broad indeed.
“It is proposed that the smallest entities within each band will pay as much as the largest. This seems a very blunt instrument to use and we would have thought a more refined approach would be better.”
The UK government has outlined that the first set of levy payments will be made in the financial year 2023/24, to take into account the economic impact of the Covid-19 pandemic.
I. Stephanie Boyce added: “Delaying the introduction of the levy is a welcome move, as many law firms are still recovering from the impact of the pandemic on their businesses. As is the fact the UK government listened to us and now small firms with a revenue of below £10.2 million will be exempt from paying the levy.
“But I would stress the concern that we’ve repeatedly articulated: that the levy – coming on the heels of the adverse impact of the global pandemic, plus the still-to-be-realised effects of Brexit – will only compound a very difficult operating landscape for many firms.
“It is disappointing the UK government has decided to penalise the profession when it is already devoting resources to prevent the system from being abused by money launderers.
“We will continue to lobby as the legislation makes its way through parliament, to ensure our members’ interests are represented.”
Notes to editors
The economic crime levy was announced by the UK government at the 2020 Budget in March.
The government hopes to introduce it by 2023/24 and is looking to raise £100 million a year.
From July to October 2020, the government held a consultation, which sought views on what the levy will pay for, how the government can ensure there is transparency over levy spending, how levy liability will be calculated, which entities should be paying the levy and how the levy will be collected and enforced.
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