ECSH42525 - By way of business

Most businesses will know if they are carrying out a relevant activity “by way of business,” but there may be circumstances where the business may not be sure. 

Economic Crime-Supervision (EC-S) guidance to determine if a person carries out relevant activities “by way of business” is derived from HMRC’s Business Income Manual - Badges of Trades.

The following factors should be considered when determining if a person carries out a relevant activity by way of business:

  • For a commercial reason (i.e. receiving a payment/benefit, rather than as a charity), where the business receives or is it expecting to receive a direct or indirect financial benefit from carrying on this activity.
  • On a regular basis.
  • At a scale that means that the exemptions in Regulation 15 don’t apply, then they’re within the scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and must register and comply with other MLR 2017 obligations. For more information on exemptions see ECSH43510.

If the answer to all the above questions is yes, then the business is carrying out the activity “by way of business” and will need to register.

If not all the questions are answered, and the officer is unsure whether the business is carrying out relevant activity, then the officer should contact the cross-cutting policy team for advice.

These factors will not be present in every case and each factor by itself is not conclusive. Therefore, all factors should be examined in their entirety to assess if a person is carrying out relevant activity by way of business. Each instance needs to be considered on a case-by-case basis.

Case Study 1

A company, registered with EC-S as an accountancy service provider, owns a building it operates from. It comes into possession of a piece of artwork that has been spraypainted onto their building by a famous artist. The art is removed and sold through an art market participant (AMP), on behalf of the business. As this activity is not typical of an accountancy service provider, it does not amount to “by way of business”, however the facilitation of the sale by the AMP is within scope of the MLR 2017, and therefore the AMP should be registered.

Case Study 2

A charity that offers a free service to help people from deprived areas to get the tax relief and credits they’re entitled to isn’t offering tax advice by way of business and isn’t required to register. If it was providing this service for a fee, it MAY be in scope and would need to register. However, consideration needs to be given to whether the exemptions within Regulation 15 apply, regardless of whether a fee is charged – see guidance at ECSH43520.

Further guidance is set out in the FCA handbook which suggests relevant factors include the regularity (how often), scale (size of transaction) and economic benefit (profit) of the activity. It also includes the proportion which the relevant activity bears to other unregulated activities carried on.

Guidance to determine if a relevant person is carrying on business in the UK is found in ECSH43000.