The FRC funding arrangements for the new financial year are set out in our Plan & Budget 2019/20 (PDF).
The FRC is funded by the audit profession, who are required to contribute under the provisions of the Companies Act 2006 and, with the agreement with HM Government, by other groups subject to, having regard to, or benefiting from FRC regulation.
The accountancy profession’s contribution to the FRC’s annual funding requirement is paid by the Consultative Committee of Accountancy Bodies (CCAB), whose members are ACCA, CAI, CIPFA, ICAEW, and ICAS; and by CIMA which contributes to the FRC’s funding requirement under the terms of a separate agreement with the FRC.
The ICAEW, ICAS, ACCA and CAI are Recognised Supervisory Bodies (RSB) for audit under Schedule 10 of the Companies Act 2006. The FRC, as the audit competent authority, delegates certain audit regulatory tasks to each RSB under a Delegation Agreement. Schedule 10 of the Companies Act 2006 and each Delegation Agreement also places an obligation on a RSB to fund the FRC’s performance of any tasks that have not been delegated where these relate to the regulation of auditors registered with that RSB. This covers the costs of the FRC’s audit review activities, audit enforcement activities and standard-setting procedures.
The activities of the FRC’s Audit Quality Review team are also funded through the National Audit Office and fees levied on Recognised Auditors registered in the Crown Dependencies.
The preparers levy is the annual levy on:
Companies listed on the London Stock Exchange with a Premium or Standard listing (EF07 & EF08).
UK companies quoted on AIM and listed on NEX (previously known as PLUS) Market group.
Large private entities with a turnover of £500m or more (EF04).
Global Depository Receipts issuers (EF09).
Government Departments, local authorities and other public sector organisations.
The amounts payable by individual organisations under the preparers levy are determined through a minimum levy and further amounts for organisations above a certain size, with the rate per £m declining in five levy bands, aligned with the FCA levy arrangements. The amounts charged to individual levy payers are based on their market capitalisation (for listed companies), turnover (for other companies) or annual expenditure (for public sector organisations).
The FCA collect the insurance levy and part of the preparers levy on our behalf. Where we identify a large private entity that is also a subsidiary of a listed company, we ask the FCA to invoice the parent for the share of their subsidiary on the same invoice as EF04. Where more than one subsidiary is identified we calculate the levy on the combined turnover. This has the effect of reducing the levy charge.
Main market companies with a Premium listing pay the full levy; companies with a Standard listing receive a 20% discount. UK AIM quoted and ISDX listed companies receive a 50% discount. Private entities with a turnover of more than £500m receive a 50% discount. Public sector organisations receive a 75% discount.
The levy for Global Depositary Receipt issuers is a fixed amount, set annually for companies that have designated the UK as their home competent authority and, at a lower rate, for other issuers.
Insurance levy for 2019/20
The insurance levy is charged to insurance companies on the same invoice as the FCA fees. The FRC sets a levy equivalent to a percentage of the fees charged by the FCA and PRA for their fee blocks A3 (insurers – general) and A4 (insurers - life).
Pension levy for 2019/20
The FRC pension levy applies to all Defined Benefit and Defined Contribution schemes with 5,000 members or more at a pension levy rate based on the numbers of members. The levy rate to be applied to individual schemes will be based on latest available data on scheme membership provided by The Pensions Regulator.
Institute and Faculty of Actuaries (IFoA)
When the FRC took on responsibilities for actuarial standards and regulation in April 2006 it was agreed that the IFoA would contribute a share equivalent to 10% of the cost of these actuarial activities.
Third Country Auditors – Registration and renewal fees
A third country auditor seeking registration in the UK must pay to the FRC a fee upon application and an annual fee thereafter for renewal of its registration in accordance with the Third Country Auditors (Fees) Instrument 2011. This fee is based upon our anticipated costs to administer the regime. The amounts payable are determined by the anticipated cost of processing applications from each of the three categories of registration; Equivalent, Transitional or Article 45. Audit firms from countries which have not been assessed as having audit oversight, monitoring and discipline regimes equivalent to those of the European member states or regimes which are moving in that direction involve the greatest amount of processing and therefore incur the highest fees.
The FRC also generates income from its publications, including from electronic rights. The XBRL project is funded by HMRC, the Charity Commission and UK Companies House. We also receive some bank interest on our deposits.