Annual Report and Accounts 2022 to 2023
5d) Consolidated fund income
|Fines and penalties issued during the year||20,921||22,222|
|Economic Crime Levy recognised during the year||1,594||0|
|Recovery of costs||(253)||(242)|
|Allowance for bad debts||(2,135)||0|
|Amount payable to the Consolidated Fund||20,127||21,980|
|Balance held at the start of the year||22,324||11,270|
|Payments into the Consolidated Fund||(31,393)||(10,926)|
|Balance held on trust at the end of the year||11,058||22,324|
Fines and penalties income
As per the The Financial Reporting Manual (FReM) (11.3.9), fines and penalties are recognised at the time that the fine or penalty is imposed and becomes receivable by the entity and should be disclosed as the total amount payable to the Consolidated Fund at the point the enforcement notice is raised and then derecognised if the penalty is appealed successfully.
As set out in Note 1(n), Statement of accounting policies, Treatment of penalty packages, income payable to the Consolidated Fund does not form part of the Statement of Comprehensive Net Expenditure (SoCNE). The amounts receivable for Fines and Penalties at 31 March 2023 were £31.393 million (2021 to 2022, £12.171 million) and the amounts payable for Fines and Penalties were £31.393 million (2021 to 2022, £10.926 million). The balance held on trust at the end of the year totalled £13.267 million (£11.673 million for fines and penalties and £1.594 million for Economic Crime Levy) which includes all Fines and Penalties Payments unpaid at that date, less £0.074 million for Gambling Commission investigation costs to be recovered and an allowance for bad debt of £2.135 million, leaving a balance of £11.058 million. There were no payables in relation to fines recovered due to be surrendered to the Consolidated Fund (2021 to 2022 £1.245 million) as at 31 March 2023.
Allowances for bad debts
Due to the impacts on trading during the COVID-19 pandemic, the Commission provided extended payment terms for some fines to be paid by gambling operators. All fees must be paid on or before the date prescribed to prevent being in breach of the payment agreement. Failure to pay will result in interest charges. Interest accrues and shall be payable by gambling operators on any part of the Financial Penalty that is not paid at the rate of 2.5 percent above Bank of England base rate until the date of payment. Historically, payment plans have not been required and fines and penalties were considered to be non-complex financial assets which were low risk of not being paid.
As per International Financial Reporting Standards (IFRS) 9 Financial Instruments, the Commission’s Impairment Policy is to provide for expected credit losses on trade receivables relating to the Consolidated Fund. This requires the use of lifetime expected credit loss provisions for all financial penalties issued. These provisions are based on an assessment of risk of default and expected timing of collection, and an allowance for loss is made for potentially impaired receivables during the year in which they are identified based on a periodic review of all outstanding amounts.
Significant areas of judgement
There is uncertainty in the estimate of the amount to be realised by the Commission from outstanding Consolidated Fund Receivables. This estimate is based on historic recovery data and data gathered from similar companies. In line with IFRS 9, Consolidated Fund debts have been grouped into similar types, in this case preferential or non-preferential claims against the insolvency. Analysis of historic trends of recovery of these types of debts has revealed that the best estimate of recovery is 0 percent for non-preferential, and 35 percent for preferential.
Expected credit losses are recorded within Consolidated Fund receivables in Note 11 - Trade and other receivables. Before there is objective evidence that an asset is impaired, it is an estimate of future loss including where impairment events have yet to happen.
During 2022 to 2023 a review of Consolidated Fund aged receivables determined two doubtful debts which are being pursued via the courts, an Impairment allowance has been recognised in year.
Economic Crime Levy (ECL) Income
As per the FReM (11.3.9), Other Income is recognised at the time it is imposed and becomes receivable by the entity and should be disclosed as the total amount repayable to the Consolidated Fund at the point the enforcement notice is raised and then derecognised if the Levy is appealed successfully.
From the 1 April 2023, the Commission will collect the ECL from licensed Casino Operators. The ECL is an annual charge on entities that are supervised under the Money Laundering Regulations (MLR) and whose UK revenue exceeds £10.2 million per year.
The ECL is being collected by three public bodies. These are:
- Financial Conduct Authority
- His Majesty's Revenue and Customs (HMRC)
- Gambling Commission (the Commission).
The amount payable will be determined by reference to their size based on their UK revenue from accounting periods ending in that year. Amounts will be payable by 30 September following the end of each financial year.
The Commission received an initial estimation from licensed Casino Operators as at 31 March 2023, of predicted volumes of levy collection to be received by 30 September 2023.
As set out in Note 1(p), Statement of accounting policies, Treatment of the Economic Crime Levy income payable to the Consolidated Fund does not form part of the SoCNE.
The Commission prepares its accounts on an accruals basis, per the International Accounting Standards Board's (IASB) ‘Conceptual Framework for Financial Reporting' and the Financial Reporting Manual 2022 to 2023 (section 4.1.3). The Commission must account for both the receipt and the subsequent payment to His Majesty's Treasury in this year’s financial accounts.
The amounts receivable for the ECL at 31 March 2023 were £1.594 million (2021 to 2022, £0) and the amounts payable for Fines and Penalties were £1.594 million (2021 to 2022, £0). The balance held on trust at the year-end date includes all levy payments unpaid at that date. There were no payables in relation to levy payments recovered that are due to be surrendered to the Consolidated Fund (2021 to 2022, £0) as at 31 March 2023.
Last updated: 18 October 2023
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