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There are no dedicated fintech tax incentives in the UK, but several features of the UK tax regime make it attractive for fintech companies. Among the incentives available are research and development (R&D) incentives for capital expenditure and revenue expenditure, as well as the patent box. There are also incentives for investors and management, including seed enterprise investment schemes, enterprise investment schemes, venture capital trust relief, entrepreneur relief, investor relief, and tax-advantaged share option plans.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, executing insurance contracts, advising on or arranging investments, dealing in investments as an agent or principal, providing credit information services, and operating a lending electronic system. Specific activities must also relate to certain specified investments set out in the RAO for them to be regulated. Electronic money, insurance contracts, shares, units in collective investment schemes, pension rights, and credit agreements are all examples of specified investments. An entity conducting the activities described in the RAO in the United Kingdom will be carrying on a regulated activity, for which it must be authorised or exempt, regardless of whether the services are provided digitally or in person.1
Applications for authorisation or registration to carry out activities under the Financial Services and Markets Act 2000 or specified activities under the PSRs must be made to the FCA. In some cases, applications should also be made to the Prudential Regulation Authority (PRA). Both regulators continue to regulate the activities of firms they have authorised or registered. The FCA is responsible for overseeing all firms' conduct of business; however, larger trading institutions are also supervised by the PRA due to their potential to cause damage to broader markets and economies.1
In June 2016, the FCA launched its regulatory sandbox in response to the lengthy and time-consuming authorisation process. The sandbox is open to authorised firms, unauthorised firms that require authorisation and technology businesses, and aims to provide those firms, 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, looking for propositions that make finance work for everyone and support the UK in its transition to a greener economy. Additionally, it is proposed to enhance the regulatory sandbox, make the digital sandbox pilot permanent, and introduce measures to encourage fintech and regtech companies to work together.2
In spite of the more informal route open to firms accepted into the sandbox, fintech firms seeking to operate in the UK are not required to obtain a specific fintech licence or permission.1
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