ECSH63430 - Regulation 26 - Prohibitions and approvals
What it means
No person can be a beneficial owner, officer or manager (BOOM) of a firm/sole practitioner carrying out relevant activity unless they have been approved by HMRC in the following relevant sectors:
- art market participant
- accountancy service provider
- estate agency business
- high value dealer
- letting agency businesses
A ‘relevant firm’ is defined under regulation 3 as any entity which is not an individual.
Purpose
This is to prevent anyone with an unspent conviction for a relevant offence (under schedule 3) being involved in the running of the business or benefiting from it.
Time Line
The approvals regime was only introduced under Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
What to establish
Has the person applied for approval with HMRC before 26 June 2018 and/or is the application for approval yet to be determined? If so, the person is able to act as a BOOM of a relevant business or sole trader while pending approval - regulation 26(3). For a letting agent or art market participant, this date would be before 10 January 2021, even if the application is still pending. - regulation 26(3)(A).
Has the business ensured that no-one has acted as a BOOM unless the person has a valid approval by HMRC or has applied for approval and not yet been determined – regulation 26(4).
An individual must not act as a relevant sole practitioner (i.e. in any other the sectors outlined above) without a valid approval by HMRC or without having applied for approval - regulation 26(5).
Has an application for approval been made either by the relevant person or by the business on behalf of the relevant person - regulation 26(6).
This application must be made as directed by HMRC – this is usually made online as part of the business/sole traders registration process. By adding a BOOM of a relevant business to the registration/application, this will then apply them for the approvals test - regulation 26(7).
The application must also contain information on the relevant persons as required by HMRC.
In determining whether a relevant person can be approved, you must establish whether the person has been convicted of a relevant offence listed in Schedule 3 of MLR 2017 and that the conviction is unspent in line with the Rehabilitation of Offenders Act 1974 (see list of Schedule 3 offences in further reading).
If a person applying for approval does not have a relevant offence, HMRC must grant the approval. HMRC may grant approval for a limited time if necessary - regulation 26(8).
If a person has been approved as a relevant person by HMRC, but the person has an unspent conviction of a schedule 3 offence, the approval is not valid. Similarly, if an approved person is subsequently convicted of a schedule 3 offence, the approval will no longer be valid - regulation 26(9).
If an approved person is convicted of a schedule 3 offence, the person must inform HMRC within 30 days of this conviction. The firm of which the person was approved with, must inform HMRC within 30 days of the date which it was made aware of the relevant conviction - regulation 26(10).
If a beneficial owner is convicted of a relevant offence, HMRC as the supervisory authority may apply to the High Court (or in Scotland the Court of Session) to order the sale of the beneficial owners’ interest in the firm - regulation 26(11).
It is a criminal offence for a person to act as a BOOM of a relevant business or act as a sole trader carrying out relevant activity without approval (i.e. being in breach of regulation 26(1)) - regulation 26(12).
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Best Practice
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
AMP - No additional Best Practice.
ASP - No additional Best Practice.
EAB - No additional Best Practice.
LAB - No additional Best Practice.
HVD - No additional Best Practice.
MSB - No additional Best Practice.
TCSP - No additional Best Practice.
Further Reading
Schedule 3 Offences - Legislation
Schedule 3 - Relevant Offences
FAQs
If a person applying for approval has no unspent conviction listed in schedule 3, but has a history of non-compliance/other high-risks, can the person fail approval?
No, the person can only fail approval if they have an unspent schedule 3 conviction. However, other actions could be considered such as refusing the registration for suspecting they will fail to comply with any obligations under the regulations (regulation 59(1)(e)).