The provisions for late payments in FEES 2.2.1R do not apply to fees payable under FEES 3 as applications, notifications and requests for vetting are generally regarded as incomplete until the relevant fee is paid.

The purpose of this chapter is to set out the general provisions applicable to those who are required to pay fees or levies to FSA, case fees to FOS Ltd or a share of the FSCS levy.

Paragraph 17 of Schedule 1 and section 99 to the Act and regulation 92 of the Payment Services Regulations and 3 enable the FSA to charge fees to cover its costs and expenses in carrying out its functions. The corresponding provisions for the FSCS levy and FOS levies and case fees are set out in FEES 6.1, and FEES 5.2 respectively.

3Regulation 92 of the Payment Services Regulations provides that the functions of the FSA under the regulations are treated for the purposes of paragraph 17 of Schedule 1 to the Act as functions conferred on the FSA under the Act. Paragraphs 17(2) and (3) however, have not been included by the Payment Services Regulations. These are, respectively, the FSA obligation to ensure that the amount of penalties received or expected to be received are not to be taken into account in determining the amount of any fee payable and the provision that allows fees to be raised to repay borrowed monies in respect of expenses incurred, before or after the coming into force of the Act or the Bank of England Act 1998.

The FSA fees payable will vary from one financial year to another, and will reflect the FSA's funding requirement for that period and the other key components, as described in FEES 2.1.7G. Periodic fees, which will normally be payable on an annual basis, will provide the majority of the funding required to enable the FSA to undertake its statutory functions.

The key components of the FSA fee mechanism (excluding the FSCSlevy and FOS levy and case fees, which are dealt with in FEES 5 and FEES 6) are:

1. (1)

   a funding requirement derived from:

   1. (a)

      the FSA's financial management and reporting framework;

   2. (b)

      the FSA's budget; and

   3. (c)

      adjustments for audited variances between budgeted and actual expenditure in the previous accounting year, and reserves movements (in accordance with the FSA's reserves policy);

2. (2)

   mechanisms for applying penalties received during previous financial years for the benefit of fee payers;

3. (3)

   fee-blocks, which are broad groupings of fee payers offering similar products and services and presenting broadly similar risks to the FSA's regulatory objectives;

4. (4)

   a costing system to allocate an appropriate part of the funding requirement to each fee-block; and

5. (5)

   tariff bases, which, when combined with fee tariffs, allow the calculation of fees.

The amount payable by each fee payer will depend upon the category (or categories) of regulated activity or exemption, or other relevant activity applicable to that person (fee-blocks). It will, in most cases, also depend on the amount of the business that person conducts in each category (fee tariffs).

By basing fee-blocks on categories of business, the FSA aims to minimise cross-sector subsidies. The membership of the fee-blocks is identified in the FEES provisions relating to the type of fees concerned.

Paragraph 17(2) of Schedule 1 and section 99(3) to the Act prohibit the FSA from taking account of penalties received when setting its periodic and other fees. Accordingly periodic fees are specified without reference to the penalties received. However, the FSA normally expects to allocate those penalties to the fee-blocks within which the penalty payers fall, by way of a deduction from the periodic fee. Any deductions of this sort are set out in the relevant fees provisions or will be notified to the fee payer at the relevant time.

3Whilst paragraph 17(2) of Schedule 1 to the Act has not been applied to the fee-raising power of the FSA under the Payment Services Regulations, regulation 92(2) of these regulations requires the FSA to apply amounts paid to it by way of penalties imposed under the regulations towards expenses incurred in carrying out its functions under the regulations, or for any incidental purpose.

The FSA, (for periodic fees, FOS and FSCS levies), FOS Ltd (for FOS case fees), expect to issue invoices at least 30 days before the date on which the relevant amounts fall due. FOS case fees are invoiced on a monthly basis. Accordingly it will generally be the case that a person will have at least 30 days from the issue of the invoice before an administrative fee becomes payable.

Paragraph 17(4) of Schedule 1 and section 99(5) to the Act permit the FSA to recover fees (including fees relating to payment services and, where relevant, FOS levies), and section 213(6) permits the FSCS to recover shares of the FSCS levy payable, as a debt owed to the FSA and FSCS respectively, and the FSA and FSCS, as relevant, will consider taking action for recovery (including interest) through the civil courts. Also, the FOS Ltd (in respect of case fees) may take steps to recover any money owed to it (including interest).

In addition, the FSA may be entitled to take regulatory action in relation to the non-payment of fees and FOS levies. FSA may also take regulatory action in relation to the non-payment of FOS case fees or share of the FSCS levy, after reference of the matter to FSA by FOS Ltd or FSCSrespectively. What action (if any) that is taken by the FSA will be decided upon in the light of the particular circumstances of the case.

1A poor estimate or forecast by a fee or levy 2payer, when providing information relevant to an applicable tariff base, is unlikely, of itself, to amount to an exceptional circumstance for the purposes of FEES 2.3.1 R or FEES 2.3.2 R. By contrast, a mistake of fact or law by a fee or levy 2payer may give rise to such a claim.