HM Treasury has published proposals for a new tax on medium and large professional firms and financial institutions: the Economic Crime (Anti-Money Laundering) Levy (economic crime levy). The amount of the levy will be based on the revenue of the regulated entity and its collection will be the responsibility of the Financial Conduct Authority, the Gambling Commission and HMRC.

The government intends for the levy to raise about £100m a year to help meet the costs of new and upgraded capacity to tackle money laundering. The rates of the levy will be reviewed to ensure that it yields the intended level of government revenue.

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)

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: