Government plans for a levy to fund the fight against financial crime amount to a ‘special tax on the legal profession’, the Law Society said today. In a strongly-worded response to a consultation on the economic crime levy announced by the chancellor earlier this year, Chancery Lane said any levy based on income would be especially harmful to the profession.

‘The legal profession is fully committed to supporting the fight against economic crime and takes anti-money laundering responsibilities very seriously,’ outgoing Law Society president Simon Davis said. ‘Law firms already play an important role in tackling money laundering, as demonstrated by the substantial costs and resources allocated by the profession to comply with its anti-money laundering (AML) and financial crime obligations.’

He noted that further increasing the cost of doing business would hit the international competitiveness of the legal sector and the willingness of law firms to invest in the UK.

‘With the UK in recession, the predicted future state of the economy being so uncertain and the legal sector already struggling in so many areas, imposing a tax on the profession is an unjustified step too far,’ Davis said. 

The Treasury has proposed that the economic crime levy, designed to collected £100m a year, be imposed from 2022/23. It is based on the idea that the costs of further action to tackle money laundering should not be borne solely by the general taxpayer but rather by a ‘joint public-private partnership’. Chancellor Rishi Sunak announced in his March budget that firms already in the ambit of money-laundering regulations should be required to pay. This would potentially affect 90,000 businesses, including many legal practices.

The consultation, on the design principles of the levy, proposed that ‘revenue from UK business should form the basis of the levy calculation’. The Law Society disagrees, saying that if the levy goes ahead it should be calculated according to the number of suspicious activity reports (SARs) that a firm submitted the previous year. This would be ‘simple, cheaper and fairer than a revenue-based levy’. However the consultation document argued that this method of calculation could incentivise non-reporting and entrench poor reporting behaviour.  

The consultation closed yesterday. The Treasury said it would announce further steps in due course.

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