Financial services and markets

The challenge of managing a commercially successful and compliant financial services business has never been greater.

Financial Services Markets

Complex organisations operating globally need advisors who are focussed, knowledgeable and close to the issues and markets that matter to them.

At Smith & Williamson, we offer a full range of specialist expertise aligned to an exceptional level of personal service providing pragmatic, valuable advice and actionable solutions to help you meet todays, and future, challenges.

Our partner-led teams provide full audit, tax, business outsourcing, fund structuring and specialist risk and regulation services across the full breadth of the financial services sector, with a focus on:

  • Asset managers
  • Brokers
  • Fintech groups
  • Lending institutions

We can also help Financial Services companies in financial difficulties through restructuring or formal insolvency procedures.

Our credentials


Your firm will benefit from a co-ordinated, cross-discipline service from our specialist partner led teams. As a financial services business ourselves, we understand what it takes to meet the demands of a successful firm. We’d expect nothing less, so neither should you.


We have extensive knowledge of the sector, enabling us to deliver bespoke, targeted solutions, able to provide value beyond the brief. With over 200 financial services clients you can be assured that the advice you receive is based on live, relevant understanding and leading technical expertise.


We are in constant dialogue with regulators and key industry bodies. Our active involvement with these groups and the informal networks we have created with other highly regarded advisors ensure that we are closely connected to the issues and concerns of financial services firms and can innovate to address them.


External advisors can be regarded as too remote. That’s not how we work. We place great emphasis on working in close partnership with our clients. These deep, proactive relationships allow us to build bespoke services focussed on long term business objectives.

Frequently asked questions

What tax issues should Financial Services businesses consider?

The most relevant tax issues to consider will depend largely on the size, profitability and nature of your business.

For loss-making or early-stage businesses, the focus is usually on cash preservation. From a tax perspective that often means R&D tax claims, VAT and payroll taxes are priority areas as these either represent opportunities to generate positive cash flows or real cash/tax leakage.

For larger, profitable Financial Services the focus shifts towards tax risk management and tax governance. As the business grows and teams expand, it becomes more and more important to have strong controls and processes in place to manage tax risk. Making sure the tax or finance teams have an early awareness of these plans is key to managing the business’ tax risk, both in the UK and internationally.

Key tax considerations often include:

  • Corporate Criminal Offence – ensuring you have the correct compliance procedures and documentation in place to prevent the facilitation of tax evasion;
  • Transfer pricing and profit fragmentation - ensuring appropriate policies and documentation are in place to justify an arm’s length price for any related party transactions;
  • International tax – managing the business’ tax residence and international presence, along with ensuring compliance with local tax rules and reporting requirements;
  • VAT recovery – ensuring an appropriate VAT recovery method is agreed with HMRC (if necessary) and applied correctly;
  • R&D tax relief – ensuring claims are maximised but robust, minimising risk of HMRC enquiry which can be costly and delay repayment of any tax credits;
  • M&A activity – considering tax efficiency of restructures and employee incentivisation.

We help Financial Services businesses of all sizes to identify and maximise tax opportunities, as well as manage and mitigate tax risks across all areas of tax. Find out more about our Business tax services

What is the process for making an R&D tax relief claim?

Financial Services businesses are often incurring significant expenditure on research and development, such as software development or upgrading existing systems to meet the new regulatory or tax requirements. In addition, businesses in this sector have not historically been good at making and maximising R&D claims.

Making an R&D tax relief claim can be beneficial for Financial Services businesses at any stage.

R&D tax relief is claimed through a company tax return assuming the company pays UK corporation tax. A claim can be made up to two years after the end of the accounting period in which qualifying expenditure was incurred; for example, a company with a year end of 31 December 2019 has until 31 December 2021 to make an R&D claim in the tax return. ,We find that preparing an R&D claim on a real-time basis, however, not only tends to increase the value of the claim,because engineers or developers are more engaged in the process, but also ensures a robust claim is made to HMRC as access to supporting data is more easily available.

The first step is generally to determine what qualifying R&D projects the business has been involved with in the relevant accounting period, and then identify the qualifying expenditure that was incurred on relevant projects. It is important to use the Department for Business Energy and Industrial Strategy guidelines when considering this.

Our R&D team includes developers who fully understand the projects undertaken by clients at a technical level and so help prepare a technical narrative to accompany your R&D claim. The amount of supporting explanation required depends on the size and risk of the claim. Our expertise has allowed us to deliver a very high success rate of R&D claims with HMRC.

Find out more about Tax credits and reliefs

On what costs can my Financial Services businesses recover VAT?

Many financial services businesses make exempt supplies and are therefore usually only permitted to recover a proportion of the VAT they incur. We often find businesses in this sector have not considered their VAT position in sufficient detail, and we are often able to find VAT savings and efficiencies. We assist many clients in this area from the outset as it can get complex quickly but here is a flavour of the general rules around input VAT recovery to get you started.

Where a Financial Services business is carrying on “taxable supplies” for VAT purposes, VAT on directly attributable business cots can be recovered. Where the business is carrying on VAT exempt activities for VAT purposes such as certain insurance, credit and finance services, no VAT recovery is allowed on directly attributable business costs.

For costs that are consumed by the business as a whole, only a proportion of the input tax will be recoverable. The proportion recoverable is determined by the partial exemption method used by the business.

The “standard method” is often the default partial exemption method for calculating how much residual input tax on costs is recoverable. This is a calculation based on the value of taxable and exempt supplies. The “standard method” must be used unless you have agreed a “special method” with HMRC. A special method should be agreed with HMRC if the standard method does not provide a fair and reasonable result for your business.

We often help Financial Services businesses to determine if the standard method is providing a fair result and if not, to approach HMRC to agree the best special method for them. VAT recovery is never allowed on client entertainment or non-business costs.

Due to the new requirements of “Making Tax Digital (MTD)” the efficiencies of automation have also resulted in further cost savings for businesses. This is something we are currently assisting many clients with.

Find out more about our VAT services

If a Financial Services business expands overseas or has cross border transactions, what tax reporting requirements are there?

Financial Services businesses in many cases have international presence and cross-border transactions and there are a number of specific points to consider from a tax perspective.

Expanding overseas and having cross-border transactions can be common for businesses within Financial Services. There are also specific tax considerations that can impact on reporting as well as other administrative requirements:

Key tax considerations may include:

  • Tax residence and international presence – assessing whether international presence has given rise to tax residence or a permanent establishment in the overseas jurisdiction that will require reporting and compliance under local tax rules;Double tax relief – whether or not the any taxes paid overseas by the entity such as corporation tax or other withholding taxes can be relieved in the UK under a double tax treaty. This may require correspondence with the overseas tax authorities depending on the nature of the tax paid;
  • Transfer pricing and profit fragmentation - ensuring appropriate policies and documentation are in place to justify an arm’s length price for any related party transactions including those overseas;
  • Anti-hybrid rules – ensuring that where there are intra-group cross-border transactions there is no “tax mismatch” between the tax treatment of the UK and the overseas jurisdiction;
  • FACTCA and CRS – ensuring adequate reporting is undertaken of non-UK financial institutions;
  • DAC 6 – ensuring adequate reporting is undertaken for EU cross-border transactions to HMRC if you are an intermediary or taxpayer. More information can be found here.

We help Financial Services businesses with all of the above and are a member of Nexia, ensuring we have associated Firms across many jurisdictions to assist you with your international queries. Find out more about our Business tax services

How can Financial Services business create more business efficiencies and save costs?

For Financial Services businesses, there are now methods available to help with cost savings and efficiencies. A significant one now is the adoption of automation, which allows people to free up more time for more valuable tasks.

With new reporting and regulatory requirements and an era of digital disruption, Financial Services businesses are moving towards digital transformation, robotics and process automation. This does not only enhance the customer or stakeholder access but can also with operational and business efficiencies.

Robotic Process Automation (“RPA”) software is a powerful tool that can perform manual, time-consuming, rules-based tasks, more efficiently than humans. For example, it is estimated that 15 minutes of human effort is equal to one minute of robot time.

This allows staff to focus their time on adding value and the automated process is undertaken faster. This also removes the risk of key person dependency in a business if a member of staff is unavailable or leaves.

Other considerations to help cash flow from a tax perspective are:

  • VAT recovery – ensuring an appropriate VAT recovery method is agreed with HMRC,if necessary and applied correctly.
  • R&D tax relief – ensuring claims are maximised but robust, minimising risk of HMRC enquiry which can be costly and delay repayment of any tax credits.

S&W assists with all of the above and have a specialist tax technology team assisting clients of all sizes with operational efficiencies at all stages. Find out more here.

Financial Services Markets Group: topical issues webinar - 29th July 2020

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