Following this announcement, the six core recommendations for policy-makers included information on how institutions and enterprises can maintain the UK’s global position in the fintech industry. The recommendations included topics such as regulatory environment, business asset disposal relief, capital markets, EMI and EIS, R&D, and VAT.
The Unicorn Council for UK FinTech has identified the key issues to maintaining development in the UK fintech landscape, while also making specific recommendations to the government, regulators, and the broader ecosystem on how to best address these barriers.
The regulatory environment policy recommendations focused on the manner in which the UK’s environment has been built over the last 10 years, as well as reacting to the new products as they emerge. At the same time, this strategy designed an unwieldy set of regulators and regulations which is currently holding back growth. The Unicorn Council for UK FinTech recommends a re-thinking procedure of the regulatory approach to create a more joined-up, secure, and efficient environment to foster competition and development.
Taking into consideration that the tax benefit of the business asset disposal relief will not attack or incentivise the overall entrepreneur to the UK, or the founder to reinvest in a new venture, the Council recommends that institutions increase and broaden the scope of this relief.
When it comes to capital markets, there is a well-documented problem with capital supply in both the UK-based listed markets and private Growth Capital. The procedure of addressing these gaps is crucial for the growth of large fintech companies in the region. Regarding this situation, the Council makes recommendations including the abolition of Stamp and duty, as well as the overall focused implementation of existing plans.
Fintechs represent a key part of the development of UK customer financial products, and their research to develop these solutions is vital. Recent changes to the tax R&D schemes are expended to significantly reduce the tax relief for fintechs. The Council recommends that the scheme includes R&D by fintechs within scope and provides an improved assurance facility.
The EMI and EIS schemes currently exclude start-ups in lending, banking, or insurance currently, and are a clear disadvantage in the early stage of capital raising. This process should be corrected given the importance of attracting optimisation to these sectors. At the same time, the EMI scheme has company-based financial limits which are not appropriate for high-growth firms and are preventing larger fintechs from competing for and retaining senior talent.
Furthermore, the VAT-exempt status of most companies in effect means they have to raise 20% more capital, compared to start-ups in other sections. The Council recommends a VAT-rebate scheme for earlier-stage firms in order to level the field.
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