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FEES 4 Annex 11B Definition of annual income for the purposes of calculating fees in fee blocks CC1 and CC2

FEES 4 Annex 11B R

1Annual income definition for credit related regulated activities

“Annual income” is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm's accounts during the reporting year in respect of, or in relation to, the provision in the UK of the regulated activities specified in FEES 4 Annex 1A Part 1 as belonging to fee-blocks CC1 or CC2 as applicable.

The figure should be reported without netting off the operating costs or business expenses, but including:

(a) all interest received on loans, brokerages, commissions, fees, and other related income (for example, administration charges, overriders, profit shares etc) due to the firm in respect of, or in relation to, the provision in the UK of the credit-related regulated activities specified in FEES 4 Annex 1A Part 1 as belonging to fee-blocks CC1 and CC2 and which the firm has not rebated to clients or passed on to other authorised firms (for example, where there is a commission chain).

Plus:

(b) any ongoing commission from previous business received by the firm during the reporting year.

Plus:

(c) the “fair value” of any goods or services the firm provided to clients. This is an estimate of the amount the firm would otherwise have received for any regulated activity under (a) above, but for which it has made a business decision to waive or discount its charges.

Plus:

(d) for credit broking where a firm effects an introduction between a lender and a borrower with a view to the borrower entering into a regulated credit agreement to finance the purchase of goods and/or services by the borrower from the firm, the difference between the amount of credit the lender provides to the borrower and the amount A accepts from the lender.2

Where the firm’s regulated activities are being carried on by an appointed representative of the firm3

The firm's annual income must include income received by an appointed representative carrying a regulated activity in a relevant fee block on behalf of the firm.3

The appointed representative's annual income must be calculated in the same way as the firm's. However, to avoid double counting, the appointed representative's annual income must not include any income also recognised in the firm's accounts, including income recognised as a result of a commission sharing arrangement with the appointed representative.3

Guidance on the interpretation of this definition is presented in Table 2 of FEES 4 Annex 13 G.