21/08/18

HMRC consults on AML supervision fees

(accountancyDaily) -- HMRC is consulting on plans to alter the way it charges fees to the businesses it supervises under money laundering regulations, saying its income from this needs to increase by 80% - 100% to cover the costs of a significant number of new staff

Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), HMRC act as the supervisors of around 27,000 businesses in seven business sectors.

These include accountancy service providers and estate agency businesses who are not supervised by a professional body; money service businesses, high value dealers, company service providers, bill payment service providers, and telecommunications and digital IT payment service providers who are not supervised by the Financial Conduct Authority.

HMRC says it is government policy that businesses should pay for the costs of supervision, rather than this being funded through general taxation.  Its current fee structure charges a fee of £130 per premises renewed annually for each premises a business operates from.

This provided 95.4% of HMRC’s fee income in 2016-172, compared to around 1.1% generated by fit and proper persons test fees and 3.5% generated by one off registration administration fees.

HMRC’s discussion paper identifies three fees model options to cover its expected costs from 2018-2020 and is inviting views on which to adopt.

One is to retain the current fees structure, but increase the level of fees ‘significantly’. The second is to alter the fee structure to no longer use the number of premises. HMRC is proposing to charge a two-part fee, made of a flat fee of £100 per business plus a turnover based fee which would be set at a small percentage (e.g. 0.03%). Businesses with a turnover less than £20,000 will not pay the additional turnover based fee.

The final option is to retain the current fees approach, of charging annually for each premises a business operates from, but with a scaling fee per premises. The premises fee will increase with the number of premises a business registers with HMRC.

HMRC says there are two ways this could be calculated. The business could pay a different rate for each charging tier or moving up to the next tier would mean the business paid the highest rate for all of its premises. The former approach avoids creating cliff edges, but the latter would be more straightforward to work out for businesses with large numbers of premises.

As well as changes to the fee structure, HMRC is considering two additional proposals, which place more of the costs on the businesses that incur them and which it wants to pursue regardless of which feed model it adopts.

One involves a late payment charge to ensure that those businesses who do not pay on time meet the associated administration costs, while the second is a new a fit and proper re-testing fee rather than this being subsumed in the fees that all businesses pay.

The late payment fee could be a flat fee of £100, a fee of 5% of the registration fee, subject to a minimum of £50, or an escalating fee based on the lateness of the payment.  HMRC says it is working towards a new re-testing scheme where everyone who has fit and proper status is re-tested on a risk sensitive basis at least every five years, and it wants to introduce an annual charge at one fifth of the fit and proper test fee, per fit and proper person in the business. At the moment, this would be £20.

The new fees structure would come into force from 1 December 2018.

The consultation is open for comment until 21 September.