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Status: You are viewing the version of the handbook as on 2005-12-31.

COMP 13.5 Management expenses

Obligation on participant firm to pay

COMP 13.5.1R

A participant firm must pay to the FSCS a share of each management expenses levy.

Limit on management expenses

COMP 13.5.2R

The total of all management expenses levies attributable to a particular period of the compensation scheme may not exceed the limit applicable to that period set out in COMP 13 Ann 1 R.

Participant firm's share

COMP 13.5.3R

A participant firm's share of a management expenses levy consists of one or more of:(1) a share of a base costs levy; and(2) a share of a specific costs levy; and(3) a share of an establishment costs levy.

COMP 13.5.4R

The FSCS must ensure that each participant firm's share of a management expenses levy separately identifies the firm's share of the base costs levy, specific costs levy and establishment costs levy.

Base costs levy

COMP 13.5.5R

Unless COMP 13.4.19 R applies, the FSCS must calculate a participant firm's share of a base costs levy by:

  1. (1)

    identifying the base costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, but has not yet levied;

  2. (2)

    calculating the amount of the participant firm's regulatory costs as a proportion of the total regulatory costs relating to all participant firms for the relevant financial year; and

  3. (3)

    applying the proportion calculated in (2) to the figure in (1).

Specific costs levy

COMP 13.5.6R
  1. (1)

    The FSCS must (subject to (2)) allocate any specific costs levy amongst the sub-schemes and relevant contribution groups in proportion to the volume of relevant costs arising from, or expected to arise from, claims in respect of the different activities represented by those contribution groups.

  2. (2)

    The FSCS must allocate any part of a specific costs levy that relates to IFA pensions review claims in accordance with COMP 13.6A.1 R (IFA pensions review compensation levies).1

COMP 13.5.7R

The FSCS must calculate a participant firm's share of a specific costs levy (subject to COMP 13.4.19 R (Adjustments to calculation of levy shares) and COMP 13.6A.1 R (IFA pensions review compensation levies)) by:

  1. (1)

    identifying each of the sub-schemes and relevant contribution groups within those sub-schemes to which the participant firm belongs, using the statement of business most recently supplied under COMP 13.6.11 R;

  2. (2)

    identifying the management expenses other than base costs or establishment costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, allocated to the contribution groups identified in (1), but not yet levied;

  3. (3)

    calculating, in relation to each relevant contribution group, the participant firm's tariff base as a proportion of the total tariff base of all participant firms in the contribution group, using the statement of business most recently supplied under COMP 13.6.11 R;

  4. (4)

    applying the proportion calculated in (3) to the figure in (2); and

  5. (5)

    if more than one sub-scheme or contribution group is relevant, adding together the figure in (4) for each contribution group.1

New participant firms

COMP 13.5.8R

A firm which becomes a participant firm part way through a financial year of the compensation scheme will not be liable to pay a share of a specific costs levy made in that year.

COMP 13.5.9G

New participant firms will normally have relevant tariff bases of nil as at 31 December in the financial year preceding that in which they join, so that they will not be required to pay a share of a specific costs levy (or a compensation costs levy because of COMP 13.6.6 R). COMP 13.5.8 R means that the FSCS does not have to estimate the tariff base of a new participant firm.

COMP 13.5.10G

Since a firm that becomes a participant firm in the course of a financial year of the compensation scheme will already be obtaining a discount in relation to the base costs levy and the establishment costs levy through the modified fee provisions of SUP 20.4.4, no rule is necessary in COMP for discounts on the base costs levy or the establishment costs levy.2

Establishment costs levy

COMP 13.5.11R

The FSCS must calculate a participant firm's share of an establishment costs levy on the same basis as a base costs levy under COMP 13.5.5 R.

COMP 13.5.12R

The FSCS may not impose an establishment costs levy after the end of the third full financial year of operation of the compensation scheme.