ECSH82630 - Penalty administration charges

The Regulations

Regulation 102 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) allows a supervisor to impose charges to meet any reasonable expenses incurred by them in carrying out their functions under the regulations. This allows HMRC, as an MLR supervisor, to recover these expenses.  HMRC recovers the vast majority of these expenses through the supervisory fees it charges to supervised businesses. However, HMRC incurs additional costs in addressing non-compliant businesses. These costs should not be borne by the supervised population as a whole, so an additional charge is passed on to non-compliant businesses reflecting the additional costs of sanctions.  This is known as the penalty administration charge (penalty admin charge).


Introduction of penalty admin charges by Economic Crime- Supervision (EC-S)

EC-S introduced the penalty admin charge in July 2018. It is an additional fee charged to a non-compliant business when a penalty is imposed. It is intended to make sure those businesses who are compliant do not pay for the cost of HMRC’s supervision of the non-compliant, by linking the charge to the imposition of civil penalties on non-compliant businesses. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Details of the penalty administration charge for each type of penalty can be found here.

 

Penalty Admin charge caps and penalty types

The penalty admin charge is capped depending upon the type of penalty it is associated with. The cap is intended to keep admin charges reasonable and proportionate to the amount of the penalty. A penalty admin charge cannot exceed the amount of the penalty being imposed.  As an example, the penalty admin charge for a type 1 penalty is £1500, so a type 1 penalty of £500 would have a penalty admin charge capped at £500.


Considerations when applying a penalty admin charge

  • The penalty early payment reduction only applies to the associated penalty and the calculation does not take into account the penalty admin charge (which should be paid in full).
  • A penalty admin charge is not appealable. However, if a penalty was reduced as a result of successful challenge, including statutory review and/or appeal, the penalty admin charge should be reduced to reflect the revised cap, as necessary.
  • A penalty admin charge is applied when a penalty is being charged. However, if multiple penalty types are being charged for the same business, this will affect how the penalty admin charge is applied. Please refer to ECSH82635 for further guidance.