If you run a jewellery business and take large cash payments, you sit squarely inside the UK's anti-money laundering (AML) rules. That means registration with HMRC, ongoing checks, training, record-keeping, and a stack of costs that land every year.
The question we get asked most often by jewellers is a simple one. Can I knock these costs off my tax bill?
The short answer is yes for the routine running costs, with one important exception that catches people out. This guide walks through what you actually pay, what is deductible against your trading profits for 2025/26, and the one cost you can never claim.
It is written for jewellers, pawnbrokers, bullion dealers and second-hand dealers in precious goods. If you want this handled for you, that is what we do at Zmartly for jewellers and precious-metal businesses.
Are jewellers' AML compliance costs tax-deductible?
Yes. Routine AML compliance costs (your HMRC supervision fees, software, staff training and adviser fees) are revenue expenses incurred wholly and exclusively for your trade, so they are deductible against your trading profits. The one thing you can never deduct is an HMRC penalty for getting it wrong.
Do jewellers have to register for AML supervision?
You must register with HMRC as a high value dealer if your business accepts or makes high value cash payments of 10,000 euros or more (or the equivalent in any currency) in exchange for goods. That is the trigger set out in the Money Laundering Regulations 2017.
HMRC counts the threshold three ways. It catches a single cash payment of 10,000 euros or more, several cash payments for a single transaction that together reach 10,000 euros or more, and payments that look like they have been broken down into smaller amounts to dodge the limit.
The key word is cash. If every sale goes through a card machine or bank transfer, you are not a high value dealer on the cash test alone. The moment you decide you will take cash at or above the threshold, you must register before you accept that payment. HMRC's wording is blunt: "you must not accept or make a high value cash payment until you have registered as a high value dealer."
Plenty of jewellers also handle scrap gold buy-backs, pawnbroking or second-hand dealing, which can bring other AML duties into play. The principle for costs is the same across all of them, so the rest of this guide applies whichever activity pulled you into the net.
What does HMRC charge for money laundering supervision?
HMRC sets the supervision fees and reviews them periodically, so always check the current figures before you budget. The latest change took effect from 1 December 2025. At the time of writing, HMRC's published fees are as follows (per HMRC's "Fees you'll pay for money laundering supervision" guidance, last updated 22 December 2025).
| AML supervision fee | Amount | What it covers |
|---|---|---|
| Application (registration) fee | £300 | One-off, non-refundable, when you first register |
| Premises fee (per premises) | £400 | Charged on each premises, then again each year as your annual declaration fee |
| Premises fee added in the second half of a year | £200 | Half the premises fee if a premises is added later in the registration year |
| Approval process fee (per person) | £40 | Charged for each beneficial owner, officer or manager tested |
Source: HMRC, "Fees you'll pay for money laundering supervision" (gov.uk, last updated 22 December 2025), reflecting fee changes that took effect from 1 December 2025. These are HMRC-set fees and can change, so confirm the live figures on that page before you pay.
There is relief for the smallest businesses. If your business turnover is less than £5,000, you can apply for a small business reduction and receive a £500 refund once your application or annual declaration has been accepted. You pay the fees up front and the refund follows approval.
A couple of points jewellers miss. The £400 premises fee is not just a one-off. It comes back every year as your annual declaration fee, so it is a recurring cost, not a sunk start-up cost. And if you do not pay the correct fee, HMRC can terminate your registration and strike you off the AML register, which then makes trading at or above the cash threshold unlawful.
What are the ongoing AML compliance costs?
The HMRC fee is only the visible part. Registration brings a set of legal duties under the Money Laundering Regulations 2017, and meeting them costs money every year. Your responsibilities include a written risk assessment, policies and controls, customer due diligence, a nominated officer, staff training and five-year record-keeping.
In practice, the recurring spend for a jeweller usually looks like this:
- The annual premises fee to HMRC (the £400 noted above, per premises).
- Customer due diligence: ID-verification checks on customers, including for occasional cash transactions of 10,000 euros or more.
- A nominated officer to receive internal suspicious activity reports, plus the time cost of running that role.
- Staff training so employees can spot and report suspicious activity.
- Record-keeping for five years from the end of a transaction or business relationship.
- Software or subscriptions for ID checks, sanctions screening and record storage.
- Accountancy or compliance adviser fees for setting up and reviewing your policies.
These are the costs the deductibility question really turns on, because most of them recur year after year.
Which AML costs are tax-deductible?
For a deduction to work, an expense has to be incurred wholly and exclusively for the purposes of the trade. That is the statutory test in section 34 Income Tax (Trading and Other Income) Act 2005 for sole traders and partnerships, and section 54 Corporation Tax Act 2009 for limited companies.
Routine AML compliance is run-of-the-mill business expenditure. You only incur it because you are trading as a jeweller, and it keeps you lawfully able to trade. So the following are normally allowable revenue expenses:
- HMRC supervision fees, including the annual premises declaration fee.
- ID-verification and sanctions-screening subscriptions.
- Staff AML training.
- The cost of the nominated officer's time spent on AML duties.
- Professional fees for drafting or reviewing your risk assessment and policies, where they relate to running the business rather than to a one-off capital project.
There is a useful planning point on the capital side too. If you buy equipment to support compliance, say a document scanner, a customer-screening terminal, or a secure safe and CCTV that double as part of your controls, that is capital expenditure rather than a revenue cost. You would not deduct it outright, but you can usually claim the Annual Investment Allowance (AIA), which gives 100% relief on qualifying plant and machinery up to £1,000,000 a year (the limit that has applied since 1 January 2019). For most jewellers that means full relief in the year of purchase.
Which AML costs are not deductible?
This is the part that trips people up. An HMRC penalty for breaching the Money Laundering Regulations is not tax-deductible.
HMRC's long-standing position is that penalties for infractions of the law are not allowable, because the purpose of a fine is to punish the taxpayer and the law's deterrent effect would be diluted if the cost could be shared with the rest of the community through a tax deduction. That principle traces back to the case of CIR v E C Warnes & Co Ltd and is set out in HMRC's Business Income Manual at BIM38515.
So if HMRC issues a penalty because you traded without registering, or your due diligence was inadequate, you pay it out of taxed profits with no relief. The fee to register correctly is deductible. The fine for not registering is not. That asymmetry is exactly why getting the compliance right is cheaper than getting it wrong.
To be clear about the line:
| AML-related cost | Revenue-deductible? |
|---|---|
| HMRC annual supervision and premises fees | Yes, revenue expense |
| Staff AML training | Yes, revenue expense |
| ID-check and screening software subscriptions | Yes, revenue expense |
| Adviser fees for ongoing policy reviews | Yes, revenue expense |
| Compliance equipment (scanner, safe, screening terminal) | Capital, but AIA usually gives full relief |
| HMRC penalty for an AML breach | No, never deductible |
Illustrative example: a high street jeweller's AML costs
Illustrative example. Imagine Aisha runs a single-shop jewellery business as a limited company. She takes occasional large cash payments, so she is registered with HMRC as a high value dealer for 2025/26. Her AML costs for the year:
| Cost item | Amount | Deductible against profits? |
|---|---|---|
| HMRC annual premises declaration fee (1 premises) | £400 | Yes |
| Approval process fee (1 manager tested) | £40 | Yes |
| ID-verification and sanctions software | £600 | Yes |
| Staff AML training (2 employees) | £350 | Yes |
| Accountant's annual policy review | £450 | Yes |
| Subtotal of deductible AML costs | £1,840 | |
| HMRC penalty for a late annual declaration | £500 | No |
Aisha's deductible AML running costs come to £1,840 (£400 + £40 + £600 + £350 + £450). At the small profits Corporation Tax rate of 19% for Financial Year 2025, that £1,840 deduction is worth £349.60 off her Corporation Tax bill (£1,840 x 19% = £349.60).
The £500 penalty is a separate story. It is not deductible, so it costs her the full £500 with no tax relief. Had that £500 instead been a deductible compliance cost, it would have saved her £95 in Corporation Tax (£500 x 19%). The penalty is more expensive than it looks, which is the whole point of the rule.
These figures are illustrative. Your own position depends on your profits, your structure and your actual spend.
How does this sit alongside VAT on gold and second-hand stock?
AML compliance does not change your VAT position, but jewellers juggle both, so it helps to keep them separate in your head.
If you deal in investment gold, your supplies are generally exempt from VAT, and where you opt to tax certain gold transactions a special accounting scheme can shift responsibility for the VAT to the buyer through a reverse charge. The detail lives in VAT Notice 701/21.
If you sell second-hand jewellery, watches or antiques, you may be able to use the VAT margin scheme, so you account for VAT only on the difference between what you paid and what you sold it for, rather than the full selling price. Investment gold coins, though, cannot be sold under the margin scheme.
None of that affects whether your AML costs are deductible. VAT is about output and input tax on your sales and purchases. The deductibility question here is about your Income Tax or Corporation Tax computation. They are two different tax accounts, and your AML running costs sit in the profits computation regardless of which VAT scheme you use.
Getting both right at once is fiddly, and it is exactly the sort of thing our team handles for jewellery and precious-metal clients. If your compliance and your accounts are not joined up, you can easily overpay tax or, worse, miss a registration deadline.
Want to make sure your AML costs are claimed correctly and your registration is watertight? Book a free call with a Zmartly accountant and we will review where you stand.
Frequently asked questions
Are HMRC money laundering supervision fees tax-deductible for jewellers?
Yes. Your HMRC supervision and annual premises fees are incurred wholly and exclusively for your trade, so they are allowable revenue expenses against your trading profits.
Is an HMRC fine for breaching the money laundering rules deductible?
No. HMRC's position is that penalties for breaking the law are not allowable deductions, so an AML penalty is paid out of taxed profits with no tax relief.
When does a jeweller have to register with HMRC for AML supervision?
You must register before you accept or make any high value cash payment of 10,000 euros or more (or the equivalent in any currency) in exchange for goods. You cannot take that payment first and register later.
How much does it cost to register as a high value dealer?
Based on HMRC's current published fees (last updated 22 December 2025, effective from 1 December 2025), there is a one-off £300 application fee, a £400 fee for each premises (which recurs each year as your annual declaration fee), and a £40 approval process fee for each person tested. Businesses with turnover under £5,000 can apply for a £500 small business reduction. HMRC can revise these, so check the current figures before you register.
Can I claim tax relief on compliance equipment like a safe or ID scanner?
Equipment is capital expenditure rather than a running cost, but you can usually claim the Annual Investment Allowance, which gives 100% relief on qualifying plant and machinery up to £1,000,000 a year, so you often get full relief in the year you buy it.
