Policy paper

Economic Crime (Anti-Money Laundering) Levy

Published 27 October 2021

Who is likely to be affected

Entities regulated for anti-money laundering (AML) purposes under the Money Laundering, Terrorist Financing and Transfer of Funds Regulation 2017 that are medium, large or very large in size based on their UK revenue. An entity is classified as:

• medium if its UK revenue for the relevant accounting period is more than £10.2 million but not more than £36 million
• large if its UK revenue for the relevant accounting period is more than £36 million but not more than £1 billion
• very large if its UK revenue for the relevant accounting period is more than £1 billion

The sectors that we expect will be impacted are:

• credit institutions
• financial institutions
• auditors, insolvency practitioners, external accountants and tax advisers
• independent legal professionals
• trust or company service providers
• estate agents and letting agents
• high value dealers, casinos, auction platforms and art market participants
• cryptoasset exchange providers and custodian wallet providers

General description of the measure

The government will establish an Economic Crime (Anti-Money Laundering) Levy (‘the levy’) on entities that are regulated for anti-money laundering (AML) purposes. The levy will first be charged on entities that are regulated during the financial year from 1 April 2022 to 31 March 2023, and the amount payable will be determined by reference to their size based on their UK revenue from periods of account ending in that year. Amounts will be payable following the end of each financial year. Therefore, first payments will be made in the financial year from 1 April 2023 to 31 March 2024.

The levy will be paid as a fixed fee based on the size band an AML-regulated entity falls into based on their UK revenue.

There will be four size bands:

• small (under £10.2m UK revenue)
• medium (£10.2m – £36m)
• large (£36m - £1bn)
• very large (over £1bn)

All small entities will be exempt, whilst medium entities will pay £10,000; large entities £36,000; very large entities £250,000.

A technical consultation on the draft legislation ran from 21 September to 15 October 2021 to receive views on the policy design and on the detail of the draft legislation, in particular the definition of UK revenue.

Policy objective

The Economic Crime (Anti-Money Laundering) Levy (‘the levy’) is part of the government’s wider objective, outlined in the 2019 Economic Crime Plan (ECP), to develop a long-term Sustainable Resourcing Model (SRM) to tackle economic crime. As one part of this SRM, and supported by ongoing government funding, the levy will aim to raise £100 million per year from the AML regulated sector to pay for government initiatives outlined in the ECP to help tackle money laundering.

The government believes it is fair and proportionate that as the sector most exposed to money laundering risk, the AML-regulated sector should be the principal contributor to the reform initiatives that will benefit them and help make the UK a safer place for them to do business.

Background to the measure

The levy was announced at Budget 2020. A policy consultation was then published on L-day in Summer 2020, running from 21 July to 14 October. The government’s response to the consultation was published alongside the draft legislation and an Explanatory Note on 21 September 2021. Following publication, a technical consultation on the draft legislation ran from 21 September to 15 October 2021.

Detailed proposal

Operative date

The levy will first be charged in the financial year running from 1 April 2022 to 31 March 2023 on any medium, large and very large entities regulated for anti-money laundering (AML) purposes at any point during that year.

The levy will first be paid by in-scope entities at the end of each financial year, meaning first payments will be due in the financial year 1 April 2023 to 31 March 2024.

Current law

This is new legislation and there is no current law in this area.

Proposed revisions

The Finance Bill 2021-2022 will establish the Economic Crime (Anti-Money Laundering) Levy in legislation.

The clauses will:

• set out that anti-money laundering (AML) regulated entities, as defined by The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, will be required to pay the levy if they are categorised as medium, large, or very large based on the amount of UK revenue reported in the relevant periods of account
• outline that an entity is: medium sized if they have UK revenue between £10.2 million and £36 million; large sized if they have UK revenue between £36 million and £1 billion; and, very large if they have UK revenue above £1 billion. Relevant entities with less than £10.2 million UK revenue will be exempt. These are considered micro and small sized entities
• revenue will be defined as turnover – as defined in the Companies Act 2006 – plus any other amounts (not included within turnover) which, in accordance with generally accepted accounting practice (“GAAP”), are recognised as revenue in the entity’s profit and loss account or income statement. Set out that UK revenue is:
  • for a UK resident entity, the entity’s revenue after deducting so much of its revenue as, on a just and reasonable apportionment, is attributable to the activities of any permanent establishment of the entity in a territory outside the United Kingdom
  • for a non-UK resident entity, the entity’s UK revenue is so much of the entity’s revenue as, on a just and reasonable apportionment, is attributable to activities of any permanent establishment of the entity in the United Kingdom
• establish the levy will be calculated and charged at entity level, and that partnerships will pay at partnership level
• establish the levy will be collected by HMRC, the Financial Conduct Authority (FCA) and the Gambling Commission – each body will collect for their existing AML-regulated populations, with HMRC also acting as levy collector for entities currently regulated by any of the 22 legal and accountancy Professional Body Supervisors
• establish the levy will be payable and reportable on an annual basis

The clauses will also provide Treasury with the power to make regulations to:

• make further provision about the assessment, payment and collection of the levy
• make provision about the enforcement of the levy

Summary of impacts

Exchequer impact (£m)

2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027
–	+95	+100	+100	+105	+105

These figures are set out in Table 5.1 of Autumn Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2021.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

The terms used in this section are defined in line with the Office for Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth. You can request further details regarding this measure at the email address listed below.

Impact on individuals, households and families

This measure is not expected to impact on individuals as it only affects entities regulated for anti-money laundering (AML) purposes under the Money Laundering, Terrorist Financing and Transfer of Funds Regulation 2017 that are medium, large or very large in size based on their UK revenue. It is not expected that the levy fees will be passed onto consumers.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that this measure will impact on groups sharing protected characteristics.

Impact on business including civil society organisations

It is expected that the impact of the new Economic Crime (Anti-Money Laundering) Levy on businesses will be significant. There is expected to be no impact on civil society organisations.

This measure will impact an estimated 4,000 businesses, who will need to self-declare their levy status (i.e. whether they are AML regulated, and their UK revenue during the period of accounts that ended in a said financial year) to their relevant collector, or be invoiced by their collector. The relevant collector (HMRC, the FCA or the Gambling Commission) for businesses will be the collector that already regulates/supervises them under AML regulations, so the majority of firms will have an existing relationship with their collecting body. The exception is c.450 firms who are regulated/supervised by the Professional Body Supervisors (PBSs), who will need to declare their status and make their levy payment to HMRC.

One-off costs will include familiarisation with the levy and assessment process, and potentially upskilling some staff when the levy is first introduced. For the c.450 firms who are supervised by the PBSs, there will be a one-off cost when they first register with HMRC for levy purposes.

Continuing costs could include the cost of firms having to annually self-declare, or be invoiced for, their levy status, including declaring their UK revenue. However, most businesses in scope are likely to already record UK revenue. There may be some additional costs to gambling firms, who are less familiar with this metric (preferring to use Gross Gambling Yield), as well as art market participants.

Business experience with the collectors could be negatively impacted as businesses will need to undertake additional tax admin to pay the levy. However, this is designed to be as simple and straightforward as possible and, to support businesses, collectors will develop clear guidance and other tools to help businesses understand and meet their obligations. The c.450 firms supervised by PBSs that will need to register with HMRC for the levy will be more impacted than firms within HMRC’s existing population.

The government will issue centralised guidance on gov.uk that sets out the process for paying the levy. HMT will also issue guidance to the collectors to ensure the process is as standardised as possible for all businesses. As this levy will apply only to medium, large and very large businesses, a small and micro business assessment is not required.

The average annual net increase in continuing administrative burden for businesses is estimated to be £0.2 million.

Estimated one-off impact on administrative burden (£m)

One-off impact	(£m)
Costs	Negligible
Savings	–

Estimated continuing impact on administrative burden (£m)

Continuing average annual impact	(£m)
Costs	0.2m
Savings	–
Net impact on annual administrative burden	+0.2m

Operational impact (£m) (HMRC or other)

The levy is being collected by the three statutory AML supervisors: HMRC, the FCA, and the Gambling Commission.

This change will result in operational impacts for HMRC, the FCA and the Gambling Commission.

Upfront costs to enable both new IT systems and processes to be developed as well as additional staff to monitor and administer their responsibilities under the levy are expected to be up to £31.8 million. Annual running costs are then expected to be up to £2.4 million.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The government will undertake a review of the levy by the end of 2027. This would seek to take place after around three years of operation, and may consider matters such as whether the levy: is meeting its original policy objectives; should continue; should remain based on just the AML-regulated sector; and, is still being calculated and collected appropriately.

Further advice

If you have any questions about this change, please contact the Economic Crime (Anti Money Laundering) Levy team by email eclevyconsultation@hmtreasury.gov.uk.