Not all law firms will be required to pay the Economic Crime Levy – the new guidance, published this month, shows that the smallest businesses will be exempt.
Find out all you need to know by reading on…
What is the Economic Crime Levy?
The new levy – announced at Budget 2020 – is designed to help fund the fight against economic crime, such as money laundering. It will impact any law firm that falls within the scope of anti-money launderings (AML) regulations, such as conveyancers and those who hold client money.
On estimate, the levy will raise around £100 million a year to help meet the costs of “new and uplifted capabilities”.
Who is subject to the tax?
Any firm within the scope of the Money Laundering Regulations (MLRs) and with UK revenue over £10.2 million will be required to pay the Economic Crime Levy – meaning law firms with revenue below £10.2 million will be exempt from the regime.
How much do I need to pay?
The exact figures have yet to be published, but experts suggest that the levy will be no more than 0.1 per cent of an entity’s UK revenue. This figure equates to:
- £5,000 to £15,000, for a medium-sized firm (£10.2 million to £36 million revenue)
- £30,000 to £50,000, for large firms (£36 million to £1 billion revenue)
- £150,000 to £250,000, for the biggest firms (£1 billion or more in revenue)
When do I need to pay?
The Economic Crime Levy has been pushed back to 2023/24 in response to the coronavirus pandemic.
The exemption “welcomed” by sector
The Law Society for England and Wales welcomed the announced exemption for the smallest firms but warned that the levy will still have an “unjustified and negative impact” on legal services.
“The levy effectively represents a tax on the provision of legal services, undermining the competitiveness of a key British industry at a time when the sector should be championed,” said Law Society president I. Stephanie Boyce.
“Imposing a levy based on a firm’s revenue is an arbitrary measure and means there is no link between the amount a business is required to pay and the extent of the risk it brings into the system.”
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