HMRC have issued a fine list for any property business that failed to register – or register in an appropriate time – for anti-money laundering (AML) supervision between April and September last year.
Our CEO, Tina Walsh, made the decision to go through every single fine across 40 pages – to determine just how many were actually sourcing businesses or practicing sourcing as part of their other services.
The findings have been quite staggering, and really should act as a wake up call for anyone calling themselves a deal/property sourcer, finder, searcher, packager etc., so let’s take a look at the data:
Sourcing Business Fines (1st April – 30th September 2023)
Out of 251 property businesses fined last year, 35 were sourcing businesses – that’s nearly 14%.
When you consider how “small fry” the sourcing sector has been labelled and perceived by it’s own, this is a high percentage when you put against all of the other businesses that are either estate or lettings agencies – dominant forces in the property sector.
Here’s where it gets interesting. The fines were not just a slap on the wrist, we’re talking about a combined total of £150,299, with individual penalties ranging from £1,450 to an eye-watering £23,400.
Even more so, some of these businesses did not have the estate agency and sourcing business SIC code – 68310 – they were registered incorrectly under a ‘vague’ code, or they were actually Sole Traders and didn’t even have a registered company at Companies House!
Traditionally, HMRC has communicated with Companies House when a property business registers under 68310, so they can determine quite quickly when they started their business and in what time they registered for AML supervision.
This is why a number of training providers have previously wrongly advised sourcers to not use this SIC code and instead a more general one.
It seems HMRC have cottoned on to this and are using alternative methods for finding non-compliant sourcing agents.
The fines issued range across the entirety of the UK, with as expected, the majority still falling in the London boroughs.
You can view the list of fines and locations below – for the privacy of each business we have not included their names here, however you can review the original fine list here: https://www.gov.uk/government/publications/businesses-not-complying-with-money-laundering-regulations-in-2018-to-2019/businesses-that-have-not-complied-with-the-regulations-2023-to-2024
| LOCATION | FINE |
| London | £23,400.00 |
| Cornwall | £14,500.00 |
| Essex | £14,500.00 |
| Luton | £11,400.00 |
| London | £7,600.00 |
| London | £7,000.00 |
| Lincolnshire | £7,000.00 |
| Bristol | £7,000.00 |
| Sunderland | £6,400.00 |
| Kent | £5,800.00 |
| London | £4,500.00 |
| Peterborough | £4,423.00 |
| Wakefield | £4,400.00 |
| Northwich | £3,800.00 |
| Sunderland | £3,700.00 |
| London | £3,350.00 |
| London | £3,200.00 |
| Harrogate | £3,200.00 |
| Watford | £3,000.00 |
| Northamton | £2,750.00 |
| London | £2,750.00 |
| London | £2,750.00 |
| Leeds | £2,750.00 |
| London | £2,750.00 |
| London | £2,703.00 |
| London | £2,650.00 |
| Luton | £2,250.00 |
| Surrey | £2,150.00 |
| Sheffield | £2,100.00 |
| London | £1,750.00 |
| Glasgow | £1,750.00 |
| London | £1,750.00 |
| Cornwall | £1,750.00 |
| Cornwall | £1,450.00 |
| Banbury | £1,450.00 |
How are HMRC’s fines calculated?
How HMRC calculates its fines are somewhat a mystery, however we feel that it is logical to assume that they are based on a number of factors, such as:
- The length of time it has been since registering with Companies House and registering with HMRC (or failing to register)
- How much the business has traded during this period
- Seriousness of other AML breaches that may have occurred, such as lack of documents, other compliance requirements, unable to show correct AML processes
Of course the longer you leave it to register, the worse the fine will get.
I haven’t traded, so I can’t be fined?
Unfortunately this is just not true. Through NAPSA, we have helped two sourcing businesses in the past overturn their fines from HMRC by proving that they hadn’t traded, however this won’t work for everyone.
HMRC expect when starting a business that you understand what you need to do and as they become more familiar with the sourcing sector, they may become less lenient on cancelling fines once they are issued.
“In the eyes of the law, ignorance is no defence”
From the in-depth research that Tina Walsh carried out – CEO of NAPSA, it became obvious that a lot of fines issued were simply for ‘not having registered for supervision at the appropriate time’ and the size of that fine ranged hugely; so claiming that you ‘haven’t traded’ will no longer save you from HMRC’s focus.
In the latest fine list, we noted there were two sourcing businesses fined £1,450 – from our previous experience working with agencies, this would suggest they have been caught however not traded.
Concerned about your sourcing business?
You could well be asking yourself “is my sourcing business compliant? Am I at risk of facing one of these hefty fines?” If these are questions you’re asking, don’t worry – we’re here to help.
We encourage you to reach out to us if you have any concerns about your sourcing business. A quick call will help our expert team to determine whether you are missing key compliance and advise on your best next steps.
Don’t let your sourcing business become another statistic in next year’s HMRC fine list. Take action now. Get in touch with us, and let’s work together to safeguard your business and your peace of mind.
Book a Free call with our team here
Or email us at [email protected]
Please note, due to the volume of emails we receive from sourcing agents and investors, please allow 2 working days for our team to reply back to you.
About NAPSA
The National Association has been created to provide guidance and support for UK sourcing agents, whilst educating and safeguarding property investors.
NAPSA promotions professionalism and compliance in the sourcing sector, working in partnership with both government approved property redress schemes.
More Information for Property Sourcers: https://napsa.org.uk/sourcers/
More Information for Investors: https://napsa.org.uk/property-investors/
