The 2024 wind-down of the Economic Substance Regulations was widely and correctly reported as good news, but it created a risk of its own: the impression that ESR is now entirely behind every business. It is not. The regime still applied fully to financial years from 2019 to 2022, and obligations and penalties for those legacy periods were not swept away. A business that reads "ESR is over" and closes the file on years it never handled properly may be leaving genuine exposure unaddressed. Here is what still matters.
What the wind-down did and did not do
The amendment removed the filing requirement for periods from 2023 onward and extinguished penalties for financial years ending after 2022. What it did not do was retroactively erase the obligations for the years the regime applied. For financial years from 2019 to 2022, in-scope businesses were still required to file their notifications and reports and to meet the economic substance test, and the consequences of not doing so for those years remain in principle.
The line between removed and remaining
The distinction is best seen directly.
| Item | Status |
|---|---|
| Filings for FY 2023 onward | No longer required |
| Penalties for FY ending after 2022 | Extinguished, refunded if collected |
| Filings for FY 2019 to 2022 | Were required; legacy obligation |
| Penalties for FY 2019 to 2022 | Not removed by the wind-down |
Who should still look
The businesses with reason to check are those that carried on a relevant activity in the legacy years and either did not file, filed late, or are unsure whether they met the substance test. For these, the question is not whether ESR is current, it is not, but whether their historical position is clean. A business that was diligent throughout 2019 to 2022 has nothing to revisit. One that treated ESR casually during those years, perhaps not realising it was in scope, may have a legacy issue that the 2024 change did not resolve.
"ESR is over" is true for current periods and misleading for the past. The years 2019 to 2022 still count, and a business that never handled them properly cannot rely on the wind-down to make that go away.
Why it is easy to overlook
The danger is precisely that the headline is reassuring. When a regime is announced as wound down, the natural response is relief and a mental note to stop worrying about it. For businesses that complied all along, that response is correct. For those that did not, it can bury a real exposure under a false sense that the matter is closed. The legacy tail is quiet, which is exactly why it is worth a deliberate check rather than an assumption.
What to do about it
If you carried on a relevant activity in any year from 2019 to 2022, confirm that your ESR position for those periods was handled correctly rather than assuming the wind-down covers it. Where there is a gap, a missed filing or an unmet test, address it deliberately, because those obligations and their consequences were not removed. Businesses that were compliant throughout can indeed close the file; those that were not should look before they do. The good news of the wind-down is real, but it is forward-looking, and the legacy years still deserve a clear answer.
This article is general information and is not tax or legal advice, and reflects the position following the 2024 amendment. We would be glad to help you review your legacy ESR position for 2019 to 2022.