The Economic Crime Levy (ECL) is an annual charge that affects organisations supervised under MLR (Money Laundering Regulations) with a UK revenue exceeding £10.2 million annually.
HMRC-supervised entities affected will have to:
- register for the ECL,
- submit a return yearly,
- pay an annual fee.
However, not all entities must submit a return or register for the ECL. You will need to determine who your collection authority is and understand the ECL process for the relevant authority. You need to understand what ECL band you fall into so you can learn to identify how to pay the levy and calculate how much you must pay.
How will the Economic Crime Levy be collected?
With three collection authorities available, the ECL could collect from either:
- the Financial Conduct Authority (FCA),
- the Gambling Commission,
- HMRC
Each collection body is responsible for supervising different industries to prevent money laundering and collecting the levy from businesses within each sector.
If you are supervised under MLR by more than one supervisor, your HMRC is the supervisory authority for:
- money service businesses not supervised by the Financial Conduct Authority (FCA)
- high-value dealers
- trust or company service providers not supervised by the FCA or a professional body
- accountancy service providers not supervised by a professional body.
- estate agency businesses
- bill payment service providers not supervised by the FCA.
- telecommunications, digital and IT payment service providers not supervised by the FCA.
- art market participants
- letting agency businesses
If supervised by only the HMRC or by one of the 22 professional body supervisors, you must register with and pay ECL to HMRC.
However, if the FCA or the GC are your supervisors, you must follow their ECL process. Even if HMRC also supervises some of your business activities.
Who must register for the ECL?
Entities are legal person(s) that have potential liability to ECL, including:
- individuals,
- companies,
- LLPs or
- Responsible partners in a partnership.
All entities much register online with HMRC if:
- You are supervised by HMRC or one of the 22 professionals body supervisors for MLR at any time in the financial year
- You are not supervised by the FCA or the GC for MLR, and your UK revenue is £10.2 million or more (pro-rated) in the financial year
Once you register for the ECL, you must pay the ECL every year your UK revenue exceeds the threshold and submit an online return.
After registering with HMRC for ECL, you will receive a reference number starting with ‘x’.
However, if you are supervised by the FCA or the GC for MLR, you must follow their ECL processes, and you do not register with HMRC.
How do I register?
Although detailed guidance is expected later in 2023, to pay ECL to HMRC you must register your business before declaring and paying your liability.
If part of a group of companies, the ECL applies to all entities that meet the requirements, and each group member must register and pay separately.
Partnerships and responsible partners must register, submit returns, and pay the ECL annually.
How do I submit a return?
You must submit a return by 30 September every year, even if you do not meet the threshold for paying the ECL that year.
You can complete and submit returns online and report on the following:
- The length of your relevant accounting period
- Your UK revenue for that accounting period
- Whether you stopped or started MLR-regulated activity in the previous financial year
- Your ECL band and the amount due
What do I pay?
The ECL is a fixed annual fee determined by the band your MLR-supervised entity sits and based on your UK revenue in the accounting period of the previous financial year.
ECL band size UK revenue
Small does not exceed £10.2m
Medium £10.2 million to £36 million
Large £36 million to £1 billion
Very large more than £1 billion
Levy amounts
ECL band size ECL fee
Small No ECL liability – not required to register with HMRC
Medium £10,000
Large £36,000
Very large £250,000
If you carry out regulated activities for only part of the financial year the amount you need to pay may reduce. The reduction calculation uses a daily apportionment of the time you observed for MLR.
For new businesses that start during a financial year where their first accounting period ends between April and June, the accounting period is taken within three months of the end of the financial year.
The ECL band sizes are adjusted accordingly if your accounting period is shorter than 12 months.
Can my Tax Agent help with Economic Crime Levy?
Unfortunately, your tax agent cannot register you for the ECL – you must do this and register online. HMRC will publish more detailed guidance later in 2023.
However, Wilder Coe’s tax team are on hand to advise you on these matters. If you wish to speak with an advisor, contact us here.
