Fintech Market Overview

This article does not constitute legal advice.

Fintech in the UK

Fintech Software

There are no dedicated fintech tax incentives in the UK, but there are various features of the UK tax regime that make it attractive for fintech businesses. There are incentives for companies; for example, research and development (R&D) incentives for both capital and revenue expenditure and the 'patent box' regime. Additionally, there are incentives for investors and management, including seed enterprise investment schemes, enterprise investment schemes, venture capital trust relief, entrepreneurs' relief, investors' relief and tax-advantaged share option arrangements.1

The list of regulated activities caught by the general prohibition is set out in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) and includes, pertinently, accepting deposits, issuing electronic money, effecting and carrying out contracts of insurance, advising on or arranging deals in investments, dealing in investments as agent or principal, providing credit information services and operating an electronic system in relation to lending. These are known as 'specified activities', and to be regulated activities must relate to certain specified investments also set out in the RAO. Specified investments include electronic money, contracts of insurance, shares, units in collective investment schemes, rights under a pension scheme and credit agreements. It does not matter whether services are offered digitally or in person; an entity carrying on the activities specified in the RAO by way of business in the United Kingdom will be carrying on a regulated activity for which it must be authorised or exempt.1

Authorisation and registration applications for carrying on regulated activities under the Financial Services and Markets Act 2000 or specified activities under the PSRs must be made to the FCA and, in some cases, to the Prudential Regulation Authority (PRA). Once authorised or registered, either or both of the regulators will continue to regulate the activities of the firm. All firms are regulated by the FCA as regards their conduct of business, but larger trading institutions will also be supervised by the PRA, which focuses on financial concerns that have an ability to negatively impact the broader market and economy.1

The authorisation process is a lengthy and time-consuming one, and the scope of permissions that firms are required to obtain are not always clear. With that in mind, the FCA launched its regulatory sandbox in June 2016. The sandbox is open to authorised firms, unauthorised firms that require authorisation and technology businesses, and seeks to provide those firms with, among other things, a reduced time-to-market at (potentially) lower cost, including by offering a restricted authorisation path, which allows those firms to operate in a limited manner under the close supervision of the FCA. The 2020 regulatory sandbox called out, for the first time, areas where it would like to see innovation, seeking propositions that make finance work for everyone and to support the UK in its move to a greener economy. There are also proposals to enhance the regulatory sandbox, making the digital sandbox pilot permanent, introducing measures to support partnering between incumbents and fintech and regtech firms.2

Despite the more informal route that may be open to firms accepted into the sandbox, no special fintech licence or permission regime applies to fintech firms looking to operate in the UK.1

Crowdfunding in the UK

Fintech in other countries

Let's introduce you

UK Fintech Lawyers

Maxim Minaev

Maxim Minaev

We provide legal and organizational services for the creation, structuring and development of fintech companies

Languages: EN LV RU

Dr Irena Dajkovic

Dr Irena Dajkovic

International law firm authorised by the UK Solicitors Regulation Authority

Languages: EN FR

Ilya Druzhinin

Ilya Druzhinin

I have over 22 years of experience in legal practice, most of which is accompanied by e-com and fintech projects

Languages: RU EN

  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/spain
  2. http://www.fca.org.uk/firms/regulatory-sandbox
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