Financial services and markets

Financial Services businesses often spend heavily on research and development, including software development or upgrading systems to meet new regulatory or tax requirements. But the sector often fails to take full advantage of R&D relief.

R&D claims can benefit financial services businesses at every stage of their life. For those paying UK corporation tax, claims are usually made through the company tax return up to two years after the end of the accounting period in which qualifying expenditure was incurred. However, preparing an R&D claim in real-time can increase the value and robustness of the claims. Engineers and developers are more engaged in the process, and supporting data is more easily accessed.

S&W can support a structured process to enhance R&D tax credit and relief claims. We can help identify qualifying R&D projects and calculate qualifying expenditure in line with Department for Business Energy and Industrial Strategy guidelines.

Our R&D team includes developers with technical expertise who understand your projects and can help prepare technical narratives to accompany your R&D claims. This expertise contributes to the high success rate of our clients’ R&D claims with HMRC.

Many financial services businesses make exempt supplies and can only recover a proportion of the VAT they incur. However, firms often don’t consider their VAT in enough detail, and we find VAT savings and efficiencies. In part, that’s because the issues are complex.

When a financial services business makes taxable supplies for VAT purposes, it can recover VAT on directly attributable business costs. But no VAT can be recovered when its activities are VAT exempt, as some insurance, credit and finance services are. VAT recovery is never allowed on client entertainment or non-business costs.

For costs consumed by the business as a whole, only a proportion of the input tax will be recoverable. This proportion is determined by the partial exemption method used by the business: The standard method is based on the value of taxable and exempt supplies and is often the default. You must use it unless you have agreed a special method with HMRC, which you should do if the standard method does not provide a fair and reasonable result.

We can help determine whether or not the standard method is appropriate and, if not, approach HMRC to agree the best special method for your business.

Finally, Making Tax Digital (MTD) is bringing automation efficiencies and cost savings for many businesses and is an area where we help many clients.

Financial services businesses often have an international presence and are involved in cross-border transactions, giving rise to tax issues. We help you address the key considerations:

Tax residence and international presence – assessing whether an international presence gives rise to tax residence or a permanent establishment requiring reporting and compliance with local tax rules

Double tax relief – determining whether taxes paid overseas, such as corporation tax or withholding taxes, can be relieved in the UK under a double taxation treaty. This may require correspondence with overseas tax authorities

Transfer pricing and profit fragmentation – ensuring appropriate policies and documentation to evidence arm’s length prices for related party transactions, including those overseas

Anti-hybrid rules – to prevent any tax mismatch between the tax treatment of the UK and the overseas jurisdiction where there are intra-group cross-border transactions

FATCA/CRS – reporting of non-UK financial institutions

DAC 6 – reports for EU cross-border transactions for intermediaries or taxpayers