MLR1PP8900 - Penalties Guidance: Step 5: The additional scale charge

Once the number of relevant clients for the relevant period has been established the number of relevant clients in a typical 12 month period will need to be considered. If the numbers of relevant clients are less than 1,000 then the additional scale charge may also need to be applied.

The number of relevant clients in the relevant period should be apportioned relative to a 12 month period using the following formula.

12 X relevant clients in relevant period / the relevant period (in months)

For example, if the relevant period is three months and there are 300 relevant clients in this period, this is equivalent to 1,200, so the additional scale charge will not apply. If the relevant period is in excess of one month but short of two, it should be rounded up for the purpose of the calculation.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

If the business clearly had less than 1,000 relevant clients in a 12 month period then the additional scale charge must be applied. Consideration must also be given to any changes in the business that may distort the number of relevant clients in a 12 month period. For example, a set of offices may have been closed and the number of relevant clients consequently reduced or the relevant period may not be a representative period.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Because the purpose of the additional scale charge is simply to ensure that any penalty for businesses with a small number of high paying clients is not set too low relative to the inherent MLR risks from these clients, the additional scale charge must be applied to the total number of relevant clients in the 12 month period otherwise a business where the regulatory breaches only applied to a few clients could have the additional scale charge applied to them incorrectly.