ECL26800 - ECL example: where there is no relevant accounting period

In the unlikely event that, there is no accounting period ending within the financial year, within three months of the end of the accounting period or any accounting period ending before the financial year then the UK revenue amounts are to be determined for the person by reference to the amount of the entity’s UK revenue that, on a just and reasonable apportionment, is attributable the financial year (please see [ECL22300]).

A just and reasonable approach may be that which takes into account when the company recognises sales. For example, the person must review whether revenue has been effectively consistent monthly across the accounting period or has it arisen at the end of the accounting period.

Please see an example of this below.

Sigma Limited commences trading on 1 January 2023 and draws up 12-month accounts to 31 December 2023 which show a UK revenue of £48 million. It is a regulated business throughout this accounting period, which means it was regulated for at least some of the 2023 financial year.

However, there are no accounting period ending within the 2023 financial year or within 3 months of the end of it. This means that FA2022 S56(6) applies, so the UK revenue for the FY is computed via a just and reasonable apportionment of the revenue in the accounting period to 31 December 2023.

Please note adjustments to band ranges do not have to be computed for Sigma Ltd, because S56(6) is only a mechanism for determining the revenue in a deemed relevant accounting period.

Step 1 - Assuming estimating revenue accrued on a straight-line basis is a just and reasonable apportionment, the revenue recognised by Sigma Ltd between 1 January 2023 and 31 March 2023 is 90/365 of the £48 million for the accounting period to 31 December 2023. This is £11.8 million.

£11.8 million of UK revenue means that it falls in the medium band (more than £10.2 million but less than £36 million).

Step 2 –

Sigma Ltd was not carrying on a regulated business for the entire financial year, so must reduce the charge using. In this case Sigma Ltd was regulated for 90 days, from 1 January 2023 to 31 March 2023 and therefore the levy is adjusted using 90/365 multiplied by the band charge.

The £10,000 medium band levy is adjusted to £2,465.75 which becomes due and payable on or before 30 September 2023.