ECL26600 - ECL example: regulated for only part of the financial year

A person is within scope to the ECL if they carry on a regulated business [ECL12200] at any point during the financial year.

However, the amount of ECL chargeable is to be proportionally reduced in the case of a person who carries on a regulated business only for part of the financial year.

This proportional reduction is calculated using a daily basis.

Gamma Ltd has an accounting period from 1 October 2021 to 30 September 2022 with UK revenue of £24m. Gamma Ltd was carrying on a regulated business from 1 October 2022.

The accounting period ended 30 September 2022 is the relevant accounting period because it is the accounting period ending within the 2023 financial year. This is despite the fact that Gamma Ltd was not carrying on a regulated business at any point of this accounting period.

Gamma Ltd meets the conditions in s54(1)(a) because it was regulated at any point in the financial year. However, Gamma Ltd was only regulated for 182 days of the financial year, from 1 October 2022 to 31 March 2023.

Gamma Ltd’s UK revenue of £30m puts it within the medium band. Ordinarily, the ECL liability would be for £10,000, but this should be adjusted as Gamma Ltd was only carrying on a regulated business for part of the financial year.

Because Gamma Ltd was only regulated for 182 days, the levy is apportioned on a daily basis 10,000 * [182/365]), which means Gamma Ltd has an ECL liability of £4,986.