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HMRC internal manual

MLR1 Penalties Guidance

HM Revenue & Customs
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Penalties guidance: MSBs/HVDs: determinations of culpable turnover: method 2

Method 2 - Turnover from Accounts for preceding accounting period, apportioned for period of the breach.

There may be good reasons why the Accounts for the relevant period are not available. Under these circumstances it is reasonable to estimate turnover, relevant turnover or culpable turnover for the relevant period by apportioning the figures from the previous 12 month accounting period.

For example, the relevant period of the breach is 8 months but it is late February and the current year Accounts are being prepared. The records examined at the visit indicate that 50% of the business’s transactions involved regulated activity and 25% of the regulated activity was potentially exposed to money laundering by the regulatory breaches. The previous year turnover was £2,000,000. A reasonable determination would be based on the following calculation.

Estimated turnover for the relevant period = 8/12 X 2,000,000 = £1,333,333

Relevant turnover = 50% of £1,333,333 = £666,666

Culpable turnover = 25% of £666,666 = £333,333 - Say £330,300

When using this method consideration must be given to any material changes which may have occurred in the business that means a direct comparison with the previous year’s turnover cannot be made. For example if sets of premises have been opened or closed, or new business has been carried out. Under these circumstances it may be necessary to make further adjustments to the determination to account for these changes.

In the case of non-cooperation it may be possible to obtain these details from Companies House or other public domain sources.

In cases of difficulty it is not the responsibility of our Compliance Officer to spend a disproportionate amount of time trawling for these details. The responsibility for providing these lies with the business and if they are not cooperative, an alternative method should be used.