Now seems an opportune time to remind those science parks and innovation centres that provide “virtual tenancy” services – offering an accommodation address for business where the business does not have a regular physical presence – that they need to verify whether they are required to register with HMRC and then, subject to turnover thresholds, pay the Economic Crime Levy before the end of this month.
There’s a surprisingly complex set of requirements (more detail here) but briefly there are four size bands:
- small entities (less than £10.2 million in UK revenue)
- medium entities (between £10.2 million and £36 million in UK revenue)
- large entities (between £36 million and £1 billion in UK revenue)
- very large entities (over £1 billion in UK revenue)
Small entities do not need to pay the levy, nor register, but once registered:
- medium entities must pay £10,000
- large entities must pay £36,000
- very large entities must pay £250,000
Critically, despite consultations, this is assessed on the operator’s aggregate UK revenue based on their accounting year ending between 1st April 2022 and 31st March 2023 – not just the revenue earned from the regulated business, in this case providing virtual tenancies, and the amount you need to pay may be reduced if you carry out regulated activities for only part of the financial year.
The crunch for many is whether it’s a subsidiary company that offers the service – many science parks and innovation centres are run by special purpose, site-specific companies who are likely to be classified as small entities – or whether it is the parent institution – often a university or research centre – who is deemed the operator. If the latter, then as probably a large entity, the Economic Crime Levy will be painful compared with the actual revenue earned.
Though there is no means of backtracking the business arrangements for a given operator, there may be a case for re-structuring a science park or innovation centre’s virtual tenancy services in the future, to ensure the annual revenue of its parent does not burden the service with needless costs.
Do remember, however, if you re-organise your virtual tenancy service, the new operating company will need to be registered under the Money Laundering Regulations before its service commences: that’s been the law since 2020.
If you’d like to discuss managing your future liability for, or any other aspect of, the Economic Crime Levy or MLR compliance and registration, I’m happy to have a brief introductory conversation as an Honorary Member of UKSPA with any full member of the Association on a no-fee, no-obligation basis.
Consultant Solicitor, Nexa Law
Honorary Member, United Kingdom Science Park Association
07859 10 6000