Budget: Tax measures for Financial Services

Measures of particular interest to Financial Services include the Reserved Investor Fund and an increase to the Economic Crime Levy

Financial Services measures

In addition to the measures covered elsewhere in this edition of Tax Matters Digest, there were several announcements of particular interest to the Financial Services sector. These included an increase in the Economic Crime Levy for very large businesses, the announcement of a new UK ISA and confirmation that the Government will proceed with the introduction of the Reserved Investor Fund. Alongside the Budget there was also the publication of a consultation on the UK’s implementation of the OECD’s Cryptoasset Reporting Framework and Amendments to the Common Reporting Standard. All financial institutions may wish to engage with the consultation, which is far-reaching.

Economic Crime Levy increased for very large businesses

From 1 April 2024, the Economic Crime (Anti-Money Laundering) Levy (ECL), charged on very large businesses with UK revenue greater than £1 billion and which are regulated for anti-money laundering purposes, will increase from £250,000 to £500,000 per annum. This is expected to raise £25 million per year in revenue for HMRC, to help the ECL meet its £100 million per annum revenue target. Small entities will remain exempt, and the levies on medium and large entities will remain at current rates (£10,000 and £36,000 respectively). 

Reserved Investor Funds

The Government has confirmed that it will proceed with the introduction of the Reserved Investor Fund (RIF), a new UK unauthorised contractual scheme fund aimed at professional and institutional investors. As part of the Summary of Responses document published in follow up to the 2023 consultation, the Government confirmed its intention to legislate through the Spring 2024 Finance Bill with more detailed rules to follow in secondary legislation. 

The RIF is expected to be a suitable vehicle to hold UK real property, but the Government has confirmed that the fund will be able to invest in a wide range of asset classes beyond real estate, subject to the RIF being within one of three restricted regimes:

  • Where at least 75 percent of the value of the RIF’s assets is derived from UK property; or
  • The RIF has only investors exempt from capital gains other than by reason of residence (e.g. certain pension funds); or
  • The RIF does not directly invest in any UK property.

There will be flexibility for RIFs to invest into Qualified Asset Holding Companies (QAHCs) and Real Estate Investment Trusts (REITs) and for REITs to be able to invest in RIFs. The Government has confirmed that it will proceed with a stamp duty land tax (SDLT) seeding relief for a RIF. However, there is no proposed specific VAT exemption or zero rating for management of a RIF and therefore the VAT treatment of management services and deductibility of any VAT chargeable will need to be considered in relation to any RIFs.


The Chancellor announced a new UK ISA, with an additional allowance of up to £5,000 for investment in UK assets. That will take the total number of ISAs being operated up to seven. A consultation document has been launched which consults on the scope of assets to be included in the UK ISA – and whether it should include funds, bonds, gilts or other assets alongside UK equities. The consultation also reminds ISA managers of the commitment in the Autumn Statement to digitalise the ISA reporting system and asks how quickly managers could make a UK ISA available alongside those changes.

UK’s implementation of the OECD’s Cryptoasset Reporting Framework and Amendments to the Common Reporting Standard

The OECD Cryptoasset Reporting Framework (CARF) is the new international tax transparency regime for the automatic exchange of information (AEOI) on transactions in cryptoassets. It was developed by the OECD to address the lack of visibility of such transactions by a central administrator and the lack of involvement of traditional financial intermediaries to report such transactions. The OECD has also carried out a review of the Common Reporting Standard (CRS), the global standard for automatic exchange of financial account information, and expanded the scope to include specified electronic money products and central bank digital currencies with more detailed reporting requirements also introduced. 

The rules and commentary for both the CARF and the CRS have already been agreed at the international level to ensure consistency across jurisdictions. However, the OECD proposals contain optional elements and lack detail on the practical implementation, so the UK Government has launched a consultation to seek views on the UK implementation of these from 1 January 2026. There is acknowledgment in the consultation document that the measures will have significant impact on the reporting entities in scope, in particular financial institutions and cryptoasset service providers (both entities and individuals effectuating exchange transactions as a business), with both one-off and ongoing costs. Nevertheless, the additional proposals are far-reaching, in particular:

  • The Government proposes changes to the penalty regime for CARF and for CRS to move to a per account penalty to align with the latest OECD initiative implemented - the Digital Platforms information regime. These changes could result in more punitive penalties. The Government is also seeking views on what additional measure would be appropriate to ensure that valid self-certifications are always collected for crypto users;
  • The UK also intends to introduce a mandatory registration requirement so that all entities within the CRS definition of Reporting Financial Institution will be required to register with HMRC’s AEOI service, irrespective of whether or not they have information to report (although UK financial institutions will not be required to make annual nil returns); and
  • The consultation seeks views on a potential extension of the CARF and CRS to include reporting on UK resident taxpayers by UK service providers, citing as advantages the streamlining of third-party reporting requirements, a more efficient use of HMRC and taxpayer time and an improved picture of risk for HMRC. Hopefully, this would allow those that reported domestic accounts for CRS to elect out of the Bank and Building Society Interest Returns (BBSI) regime; however, the interesting question is whether those that currently only undertake BBSI reporting can continue with that approach or have to change (at least for a transition period). However, the consultation seeks views on what impacts this would have on reporting entities in scope and on what regulatory or legal issues will need further discussion. Whilst, for the CARF and the CRS, the Government is seeking views only on the specific proposal (rather than seeking views on alternative proposals), with respect to the domestic CARF and CRS the consultation is setting out objectives and identifying options.

The consultation is open for response until 29 May 2024. For further information on this, please speak to the authors or your usual KPMG in the UK Tax contact.