Economic crime levy
The government is introducing an economic crime levy on anti-money laundering regulated businesses – including law firms – to fund the fight against economic crime.
Firms will pay a fixed fee based on entity size as determined by UK revenue. There are four bands:
- less than £10.2 million – small firm
- between £10.2 million and £36 million – medium firm
- between £36 million and £1 billion – large firm
- more than £1 billion – very large firm
The exact fees for each band are:
- small firms to be exempt
- medium firms to pay £10,000
- large firms to pay £36,000
- very large firms to pay £250,000
The levy will be collected by HM Revenue and Customs (HMRC), the Financial Conduct Authority and the Gambling Commission.
HMRC will collect the levy from in-scope legal entities.
The first payments would be made in 2023/24, one year later than originally planned.
HM Treasury states that the levy would raise £100 million per year from around 4,000 AML-regulated entities.
The exact allocation of the funds will be determined by spending review processes.
Although we're pleased the government has listened to our warnings and exempted small firms from paying the levy, we remain concerned about its impact on legal services.
Solicitors and firms already play an important role in tackling money laundering and economic crime, allocating substantial resources to comply with AML obligations.
Basing the levy on revenue is an arbitrary measure with no link between the amount a business must pay and the extent of money laundering risk it brings into the system.
We're also concerned that the bands proposed are too wide.
Under the proposals, the smallest firms within each band would pay as much as the largest. We would be more supportive of a more refined approach.
We welcome the delay to the introduction of the levy to 2023/24, which will allow firms more time to recover from the impact of the COVID-19 pandemic.
However, firms are still navigating a difficult operating landscape and the effects of Brexit are still to be realised.
I. Stephanie Boyce, president of the Law Society, said: “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.”
- April 2023 – HMRC, the Financial Conduct Authority and the Gambling Commission collect the first levy payments from businesses
- April 2022 – the first levy year begins
- March 2022 – the government laid the first tranche of secondary legislation that sets out the framework for key levy processes – including notification, payment and returns – to give levy payers and collectors clarity before the levy is collected
- February 2022 – the economic crime levy was introduced by the Finance Act 2022, which gained royal assent on 24 February
- October 2021 – in our response to the government, we emphasised that the views of the legal sector must be given greater weight in the design of relevant policies, procedures and systems in relation to financial crime
- September 2021 – we analysed the government's response and spoke to affected members to gather views on the draft legislation
- February 2021 – past president David Greene explained the representations we've been making to government on behalf of members
- October 2020 – in response to the government's consultation, we strongly opposed the imposition of the levy and warned that a levy based on revenue would harm the profession
- July 2020 – the government launched its consultation on the economic crime levy and we sought feedback from members about the impact on their businesses
The first levy year will run from April 2022 to March 2023, with the first levy payments being collected in April 2023.
The government plans to set out a second tranche of secondary legislation on the remaining processes before April 2023.