3rd October 2019
By Sharmini Woodings, Partner
A number of changes affecting High Value Dealers (HVD) have either been introduced recently or are about to come in. If this is you, read on for details about two key areas likely to impact you and your business.
HM Revenue & Customs has a specific definition of a High Value Dealer (HVD), particularly as businesses and sole traders falling into this category are bound by specific regulations. You can find a quick reminder of what this is at the end of th
is article. The ultimate aim of the changes is to tackle money laundering to protect us from the effects of crime. This is particularly as criminals’ methods continue to reach new levels of sophistication.
HMRC has updated its customer due diligence meaning that you must make check before making or receiving payments. This includes checking that the UK based businesses or people you are dealing with have registered with HMRC as HVDs.
If you discover that buyers or sellers you are working with haven’t registered you should not proceed with any transactions. If you do they may be regarded as money laundering. HMRC’s guidance says that if you find yourself in this situation, you should consider reporting it to the National Crime Agency (NCA).
If you fail to do this, the penalties are high. Your business could face having its HVD status withdrawn, meaning you could no longer legally continue to trade. Your details may also be published on the GOV.UK website.
The new anti-money laundering regulations introduced in 2017 are being tightened up. Therefore, a new EU Anti-Money Laundering Directive known as AMLD 5 will come into effect on 10 January 2020.
AMLD 5 will focus on key industries. This time they specifically include the art sector and high value works of art which amount to €10,000 or more. Other industry sectors include oil, arms, precious metals and tobacco.
To begin with ensure that you fully understand the rules around high value cash payments. We can help you to do this if you are in any doubt.
You should design, introduce and document robust internal systems and controls addressing these situations. For example, the ‘know your client’ checks as mentioned above. Staff will also need thorough training and we would recommend that you regularly check that these systems are being followed. You may be required to demonstrate what you have done and therefore keeping a record of these checks is a good idea. In accordance with the regulation you must report any suspicious activity to the National Crime Agency. The Agency will then share it among EU financial intelligent units
The UK is home to one of the largest global art market. So, it’s interesting that the directive doesn’t just mention art dealers this time. It will also affect their intermediaries for transactions over the €10,000 threshold, for example galleries, auction houses and free ports.
As the world continues to deal with the impact of money laundering on our security, we can expect to see further tightening up and development of existing regulations. In particular they relate to transparency and knowing ‘who you are dealing with’. Businesses have ever increasing responsibilities including sharing information to help fight crime. Should you need advice about how these issues may affect your business, just let us know.
The HVD definition applies to businesses or sole traders making or accepting cash payments of the equivalent of €10,000 or more. This is whether it is one transaction or in several linked instalments. The definition applies even if the business or person only occasionally makes or accepts this size payment. Above all, you cannot make or receive a payment of the equivalent of €10,000 or more until you have registered.
You can register with HMRC using their online service. You’ll need your user ID and password for your Government Gateway account if you already have one set up. If you don’t, you can set one up as part of the HVD process.
Sharmini is Wise & Co’s managing partner. She joined the firm in 1989 and became a tax partner in 1997. Sharmini specialises in providing owner managed businesses with strategic consultancy and tax advice. She is particularly interested in art and enjoys visiting art museums during her travels both in the UK and abroad. Her love of art is reflected in her client portfolio, which includes a number of fine art and antiques dealers. She is a first class communicator, which is essential to delivering the high quality service that Wise & Co prides itself on.