- My LS
Economic crime levy
In the March Budget, the government announced its intention to introduce an economic crime levy on anti-money laundering (AML) regulated businesses – including law firms – to contribute to the fight against economic crime.
HM Treasury published a consultation on the detail of the levy in July 2020.
The levy is planned to begin from financial year 2022/23 onwards.
Through 36 questions around key areas of collecting the levy, levy calculation and what is should be spent on, the consultation sought views on:
- what the levy will pay for
- how the government can ensure transparency over levy spending
- how levy liability will be calculated, and which businesses should be paying
- how the levy will be collected and enforced
Whilst the legal profession has a strong interest in a successful, effective and proportionate AML regime, we argued:
- 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 AML and financial crime obligations
- a reduction in money laundering benefits society as a whole, with improvements to AML going far beyond any efficiency benefits gained by the regulated sector – it's more appropriate for these improvements to be funded by taxpayers and assets recovered from criminals and AML fines on the regulated sector
- any levy based on revenue would be especially harmful to the profession, as it decouples it from the risks against which it is intended to protect
- if, against our advice, the levy is to go ahead, a calculation-based model based on the number of suspicious activity reports (SARs) which a firm submits the previous year would be simple, cheaper and fairer than an income-based levy
- an exemption should exist for small firms with a revenue of under £10.2 million a year – it's also essential that the levy is based on domestic revenue generated by AML-related activity only
- it would be damaging to the UK’s international reputation as a good place to do business and a global legal centre – when international firms are looking to expand, they're likely to raise concerns that the UK has started taxing solicitors by virtue of their lawful, and already highly regulated, role in advising clients
The consultation has now closed.
We expect the government to announce the outcomes of the consultation in the first quarter of 2021.
In the meantime, we continue to engage with stakeholders and government officials to ensure our position is well understood.