YOUR COMPLIANCE MATTERS – Minimising your FSCS and FOS levies
- By MICHAEL HANSON
- •
- 31 Aug, 2021
YOUR COMPLIANCE MATTERS – Minimising your FSCS and FOS levies
Relevance: All Firms with commercial clients
Action required: Consider level of Annual Income declared to minimise FCA Fees and Levies.
It is that time of the year when the FCA are sending out invoices for Regulatory Fees and Levies; your contribution to paying for the costs of regulation.
As a reminder, the fees and levies are always based upon the amounts of income reported in the relevant sections in the year before, i.e. the invoices being sent this year will be based on income reported in 2020.
· Annual Income is the amount of income received and retained by the firm in its financial year in respect of, or in relation to the provision in the UK of regulated activities.
· The regulatory fees and levies are made up as follows:
o Financial Conduct Authority (FCA);
o Financial Services Compensation Scheme (FSCS);
o Financial Ombudsman Service (FOS); and
o Financial Guidance Levy.
There are two levies that firms can investigate to determine if they would benefit from using an approach referred to as “tailored income”; the two levies involved are the FSCS and the FOS.
The FSCS accepts claims from “eligible claimants” and the FOS takes complaints from “eligible complainants”, both of which are defined as follows
Eligible claimants (FSCS):
An eligible claimants is any person (including a body of persons corporate or unincorporate (that is, a natural person, a legal person and, for example, a partnership), who at any material time was:
· a credit union;
· a trustee of a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme;
· a firm carrying on the regulated activity of operating, or winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme; or
· a small business;
Eligible complainants (FOS):
An eligible complainant must be a person (including a body of persons corporate or unincorporate (that is, a natural person, a legal person and, for example, a partnership), that at the time the complainant refers the complaint to the respondent is:
· A consumer, which is:
o any natural person acting for purposes outside his trade, business or profession;
· A micro-enterprise, an enterprise which:
o employs fewer than 10 persons; and
o has a turnover or annual balance sheet that does not exceed €2 million,
· A charity, which:
o has an annual income of less than £6.5 million t;
· A trustee of a trust, which
o has a net asset value of less than £5 million;
· A small business an enterprise which:
o is not a micro-enterprise;
o has an annual turnover of less than £6.5 million (or its equivalent in any other currency); and
o employs fewer than 50 persons; or
o has a balance sheet total of less than £5 million (or its equivalent in any other currency),
· A guarantor.
This means that there may be instances where a firm has arranged insurance covers for an entity that would not be able to make a claim to the FSCS or complain to the FOS. The income received in those cases can be deducted from the full amount of annual income declared.
If you have been making the calculation over the past few years then you will recognise the savings that could be had. But if not, then it is a matter of individual consideration as to whether the savings can justify the time and effort required to undertake such an exercise.
There is a “Fee Calculator” available on the FCA website to enable firms to estimate the total of fees and levies. It can be accessed using the following link: Fee calculator | FCA.
Even though you may have reported your income without the benefit of “tailoring”, you can resubmit the amounts, if you believe that there any savings are worth the effort.
If you need any further guidance, please call us and we will be happy to provide more help.
