EMI license in
UK 2024
The Electronic Money Institution (EMI) license is a critical regulatory framework within the UK’s financial services sector, empowering businesses to issue electronic money and provide a variety of payment services. Obtaining an EMI license in UK allows companies to operate with greater flexibility, ensuring compliance with stringent regulatory standards while fostering innovation in the fintech space.
In 2024, the significance of EMI licenses in the UK is underscored by several pivotal factors:
In 2024, the significance of EMI licenses in the UK is underscored by several pivotal factors:
- Regulatory Landscape: The Financial Conduct Authority (FCA) oversees the issuance and regulation of EMI licenses in the UK. The regulatory environment is continuously evolving to address emerging risks, technological advancements, and the increasing complexity of digital financial services. Companies must stay abreast of changes in regulatory requirements to ensure ongoing compliance and secure their operational licenses.
- Market Growth and Innovation: The digital payments sector is experiencing robust growth, driven by the widespread adoption of e-commerce, mobile payments, and digital wallets. An EMI license in UK enables companies to capitalize on these trends by offering innovative payment solutions, enhancing user experiences, and expanding their market reach.
- Consumer Trust and Security: Holding an EMI license enhances a company’s credibility and builds consumer trust by demonstrating adherence to high standards of financial security and consumer protection. Licensed EMIs in UK are required to implement stringent anti-money laundering (AML) measures, data protection protocols, and safeguard client funds, fostering a secure and reliable financial ecosystem.
- Competitive Advantage: The ability to issue electronic money and provide payment services under an EMI license gives businesses a competitive edge in the fintech industry. It allows for the development of new financial products, integration with other financial services, and the ability to operate across borders within the European Economic Area (EEA) under the EU passporting arrangements (subject to Brexit-related changes).
- Technological Integration: Advances in technology, including blockchain, artificial intelligence, and machine learning, are transforming the financial services landscape. EMI license holders are at the forefront of leveraging these technologies to enhance payment processing, improve fraud detection, and offer personalized financial services.6. Global Economic Trends: The global economic environment, including trends in digital transformation, financial inclusion, and cross-border trade, influences the demand for electronic money services. Companies with an EMI license can tap into these global trends, offering innovative solutions that cater to a diverse and geographically dispersed customer base.
Obtaining an EMI license in UK involves a rigorous application process, including demonstrating the business’s financial soundness, governance structure, and compliance with regulatory requirements. Once licensed, EMIs must continuously adhere to regulatory standards, reporting obligations, and undergo periodic reviews by the FCA.
The United Kingdom, renowned for having one of the world’s leading banking systems and being a fintech hub for EMIs, has established itself as a prime location for those looking to enter or expand their presence in the Electronic Money field. At Legalaes, we offer a comprehensive turnkey solution for those seeking to acquire this prestigious license.
Regulations for EMI license in UK
The Financial Conduct Authority (FCA) in the UK acts as the regulatory and supervisory authority for Electronic Money Institutions (EMIs) under the Electronic Money Regulations 2011. The primary objectives of the FCA include:
- Ensuring consumer protection through compliance with regulations, promoting transparency, and maintaining market integrity by preventing financial crimes and safeguarding customer funds.
- Upholding high standards for market conduct and financial stability by ensuring EMIs have sufficient capital, liquidity, and robust AML practices to prevent misuse of the financial system.
- Encouraging competition within financial services to benefit consumers, fostering a fair environment for both new and existing firms to offer innovative services.
- Ensuring strict adherence to Electronic Money Regulations and Payment Services Regulations by authorizing, supervising, and enforcing regulatory standards on EMIs.
- Facilitating innovation and maintaining a resilient financial infrastructure by ensuring EMIs operate efficiently, setting guidelines for operational resilience, and requiring contingency plans for disruptions.
The regulatory framework governing Electronic Money Institutions (EMIs) in the UK is designed to ensure the integrity, security, and transparency of electronic money services. The Financial Conduct Authority (FCA) is the primary regulatory body responsible for overseeing EMIs. Here is an overview of the key regulations and requirements for obtaining and maintaining an EMI license in the UK:
Application Process
Application Process
- Business Plan: Applicants must submit a detailed business plan outlining their business model, target market, and financial projections.
- Capital Requirements: EMIs must meet minimum initial capital requirements, typically €350,000, ensuring they have sufficient financial resources to operate.
- Governance and Management: Applicants must demonstrate that they have a robust governance structure and experienced management team in place.
- Internal Controls: EMIs must implement effective internal controls and risk management procedures.
Regulatory Requirements
Regulatory Requirements
- Safeguarding of Funds: EMIs are required to safeguard customer funds by either segregating them from the institution’s own funds or covering them with an insurance policy or comparable guarantee.
- Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF): EMIs must comply with AML and CTF regulations, including conducting customer due diligence, monitoring transactions, and reporting suspicious activities.
- Operational Resilience: EMIs must ensure their operational resilience by having robust IT systems, continuity planning, and security measures to protect against cyber threats.
- Conduct of Business: EMIs are required to act in the best interest of their customers, ensuring fair treatment, transparency, and clear communication.
Ongoing Compliance
Ongoing Compliance
- Reporting Requirements: EMIs must regularly report to the FCA, including annual audited financial statements, quarterly statistical reports, and any significant changes in their business.
- Regulatory Returns: EMIs must submit periodic regulatory returns detailing their activities, financial condition, and compliance with safeguarding requirements.
- Audits and Inspections: The FCA conducts periodic audits and inspections to ensure ongoing compliance with regulatory standards.
- Customer Protection: EMIs must have mechanisms in place to handle customer complaints and disputes efficiently.
Key Regulatory Frameworks and Directives
Key Regulatory Frameworks and Directives
- Electronic Money Regulations 2011 (EMR 2011): This legislation transposes the EU E-Money Directive into UK law, setting out the requirements for EMIs, including authorization, conduct, and safeguarding of funds.
- Payment Services Regulations 2017 (PSR 2017): These regulations govern the provision of payment services, including requirements for transparency, rights and obligations of payment service providers, and customer protection.
- General Data Protection Regulation (GDPR): EMIs must comply with GDPR requirements to protect personal data and ensure data privacy.
- Financial Services and Markets Act 2000 (FSMA): This act provides the overarching framework for financial regulation in the UK, including provisions applicable to EMIs.
Brexit Considerations
Brexit Considerations
- Passporting Rights: Post-Brexit, UK-based EMIs no longer have automatic passporting rights to operate across the European Economic Area (EEA). They must establish subsidiaries or seek authorization in each EEA country they wish to operate in.
- UK-EU Trade Agreements: Companies must stay informed about any trade agreements or regulatory alignments between the UK and the EU that could impact their operations.
Technological and Market Developments
Technological and Market Developments
- Fintech Innovations: The FCA encourages innovation within the EMI sector, supporting initiatives such as the Regulatory Sandbox, which allows companies to test new products and services in a controlled environment.
- Cryptocurrency and Blockchain: EMIs dealing with cryptocurrencies must navigate additional regulatory scrutiny and ensure compliance with evolving guidelines on digital assets.
Types of EMI licensing in UK
| License type | Description |
|---|---|
| EMI License | Comprehensive financial services including issuance of electronic money, execution of payment transactions, management of electronic payment systems, and provision of operational risk management solutions |
| Small Electronic Money Institution (SEMI) License | Offers electronic money services and payment services on a smaller scale, suitable for businesses with lower operational volumes and capital requirements. Must not exceed €5 million in average outstanding e-money or €3 million per month in payment. |
| Authorised Payment Institution (API) License | Covers a broad range of payment services including executing payment transactions, issuing and acquiring payment instruments, and money remittance. Suitable for businesses engaging in extensive payment. |
| Small Payment Institution (SPI) License | Provides a range of payment services on a smaller scale, with lower capital requirements. Ideal for smaller businesses looking to offer payment services without the need to issue electronic money. Limited to operating within the UK and must not exceed €3 million in average monthly payment. |
With EMI license in UK you can provide following services:
- services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account
- services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account
- execution of payment transactions, including transfers of funds on a payment account with the payment service provider of the payment service user or with another payment service provider: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders
- execution of payment transactions where the funds are covered by a credit line for a payment service user: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders
- issuing and/or acquiring of payment instruments
- money remittance
- execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunications terminal equipment, digital or IT device and the payment is made to the telecommunications network or IT system operator, acting only as an intermediary between the supplier of the goods or services and the payment service user
- Account information services
- Issuance of e-money
Overview of requirements to obtain EMI license in UK
- Incorporate a company under UK companies law.
- Appoint an Executive Director, Compliance Officer, IT Specialist, and Internal Audit Officer.
- Contribute required minimum paid-up capital
- Establish a physical office in the UK.
- Ensure all board members and staff meet the Fit and Proper criteria set by the FCA, maintaining high standards of integrity and professional conduct.
- Keep client funds and company funds separate to ensure proper safeguarding and compliance with regulatory requirements.
Estimated time frames
Company formation
1 week
Documents preparation
4-8 weeks
PI / EMI license obtainment from FCA*
6-10 months
*The timeline also depends on the workload of FCA and any clarifications and queries that FCA may request in relation to the application.
Legal services for obtaining EMI license in UK
Basic Package
25,000 EUR initial set up
- Turnkey company formation
- Legal address for 1 year
- Corporate documents
- Due diligence for shareholders and key directors
- Overview of the business plan
- Overview of financial forecasts
- Overview of an organizational structure
- Analysis of the internal documents
- Applying for the license
Registration of the EMI / PI licensed company under the minimum regulatory requirements
Additional services on request
- Preparation of individual business plan
- Preparation of required documents for the licensing
- Accounting services
- Assistance in opening bank account, including segregated and safeguard accounts
- Connection with SEPA system
- Connection with SWIFT
- Connection with card issuance programme
- Apostilled corporate documents
- Introduction to confirmed software provider
- Legal support
Ready-Made solution
available on request
- Registered company
- Legal address for 1 year
- No debts, no liabilities – clean company
- Active license
- Corporate documents
- Assistance with transfer of ownership
Edgar Mironov
Head of FinTech Projects
Requirements for EMI licensing in UK
List of required documents
- License Application: The official application form for the EMI license in UK.
- Business Plan: A detailed business plan outlining strategic objectives, service offerings, market analysis, and financial projections.
- Curriculum Vitae (CVs) and Qualifications: CVs for shareholders and key team members demonstrating their expertise and relevance to the electronic money industry.
- Organizational Structure: Outline of the company’s structural hierarchy and reporting lines.
- Internal Policies and Manuals: Internal operational, compliance, and client management manuals.
- IT Infrastructure Documentation: Details of IT infrastructure, including agreements with software providers or descriptions of proprietary software.
- KYC/AML Agreements: Agreements with providers for Know Your Customer (KYC) and Anti-Money Laundering (AML) services.
- Programme of Operations: Detailed plan describing the company’s operational processes.
- Source of Funds/Wealth (SoF/SoW): Documentation verifying the origin of funds and wealth for shareholders owning more than 10% of shares.
- Draft Service Agreements: Preliminary service agreements for clients.
- Articles of Association/Memorandum: Foundational corporate documents.
- Methods of Safeguarding: Strategies to protect client funds and data.
- Cloud Computing Services: Details of agreements with cloud service providers.
- ICT and Security Management: Documentation of information and communications technology and security management protocols.
- Civil Liability Insurance: Evidence of adequate insurance coverage to manage potential risks.
- Non-criminal Record: Clean criminal record certificate for significant shareholders and key team members.
- Business Address Approval: Confirmation of a physical office location in the UK, demonstrating compliance with local regulations.
Business premises requirements
- To obtain a EMI license in UK it is necessary to set up a physical office in the UK to accommodate staff, facilitate data management, and strengthen the operational foundation, as required by the regulatory authority.
Share Capital and Government Fees
- Minimum Share Capital: For obtaining PI license in UK the minimum share capital is 20 000 EUR and for obtaining full EMI license in UK – 350 000 EUR. In addition, it is necessary to have extra capital reserve to ensure a capital adequacy ratio of at least 1.3 – 1.5 EUR is advisor.
- Government Fees: The application fees for PI is 1500 GBP and for EMI license in the UK is 5000 GBP
Bank account requirements
- Safeguarding Account: Detailed arrangements for the establishment of a safeguarding account to manage funds separately from those of non-electronic money holders.
- Operational Bank Accounts: Necessary for managing daily operational expenses and transactional purposes, facilitating the processing of customer transactions through current accounts.
- Current Account: For transactional purposes, allowing for the receipt and sending of payments related to the services offered.
Personnel Requirements
- Management Board: Comprising at least three members, with the CEO potentially included as a board member.
- Local Executive Director: Fluent in English, overseeing operational management in the UK.
- AML and Compliance Officers: Ensuring adherence to regulatory standards and anti-money laundering regulations.
- IT Security Officer: Can be an outsourced role, responsible for implementing and managing IT security measures to safeguard data and operational integrity.
- Internal Audit Officer: Can be outsourced, conducting ongoing internal compliance checks and operational audits
Not sure about the number of staff you need to employ for your PI/EMI project? Contact Legalaes experts to define the right personnel structure for your business model.
Roadmap of the project
For more detailed road map of the project and commercial offer – get in touch with our Forex professional.
Edgar Mironov
Head of FinTech Projects
Documentation Preparation
Necessary documents are collected and organized from shareholders and team members, including passports, non-criminal records, Source of Funds/Wealth (SoF/SoW), and relevant educational certifications. All participants are ensured to meet the stringent standards required for operating within the UK financial system.
Company Incorporation
The company is incorporated under UK companies law, clearly defining the shareholding structure and detailing the percentage of shares held by each shareholder, establishing the legal foundation for the business.
Application Pack Preparation
A comprehensive application pack is compiled, including all necessary documents and fulfilling regulatory requirements to streamline the submission process to the Financial Conduct Authority (FCA).
Local Team HR Services
The HR processes are managed for establishing the local team, including executive directors and compliance officers, ensuring they are equipped and knowledgeable about the UK’s regulatory environment.
Application Submission
The completed application along with the documentation pack is submitted to the FCA, officially initiating the licensing process.
Bank Account and Safeguarding Setup
A bank account and a safeguarding account are set up, ensuring compliance with regulatory mandates to protect customer funds.
Regulatory Follow-Up
Continuous support is provided in addressing any inquiries or requests for additional information from the FCA, typically involving multiple rounds of communication to ensure compliance with all regulatory concerns.
License Approval
The process of receiving approval from the FCA is facilitated, the initial board meeting is conducted to formalize operational procedures, and premises for the company’s operations are secured to establish a strong business presence in the UK.
Finalizing Bank and Safeguarding Accounts
The establishment of bank and safeguarding accounts with payment institutions is completed, ensuring all financial infrastructure is in place prior to license operation.
Operational Launch and Additional Services
Support is provided for the start of operations under the new license, including the integration of additional services such as SWIFT applications and card issuing through partnerships with major networks like Mastercard and Visa.
Detailed Time Frames to Obtain a EMI License in UK
The process of obtaining an Electronic Money Institution (EMI) license in the UK involves several stages, each with its own timeline. The Financial Conduct Authority (FCA) oversees the licensing process and provides guidance on the expected time frames. Here is an overview of the estimated time frames for obtaining an EMI license in the UK:
1. Company formation
Time Frame: 1 week
2. Preparation Phase
Time Frame: 4-8 weeks
- Business Plan and Documentation: Preparing a comprehensive business plan, financial projections, governance structure, risk management policies, and other required documentation.
- Consultation with Experts: Engaging with legal, compliance, and financial advisors to ensure all application requirements are met.
- Internal Approvals: Securing internal approvals and stakeholder buy-in for the application.
3. Submission of Application
Time Frame: Immediate upon completion of preparation
- Online Submission: Applications are submitted to the FCA through their online portal.
- Initial Review: The FCA conducts an initial review to ensure the application is complete and all required documents are included.
4. FCA Review Process
Time Frame: 3-6 months
- Detailed Assessment: The FCA conducts a thorough assessment of the application, including the business plan, governance structure, financial health, and compliance with regulatory requirements.
- Queries and Clarifications: The FCA may request additional information or clarifications during this period. Applicants must respond promptly to avoid delays.
- Interviews and Meetings: The FCA may conduct interviews or meetings with key personnel to assess their suitability and understanding of regulatory obligations.
5. Decision and Notification
Time Frame: 2-4 weeks
- Approval or Rejection: The FCA will either approve or reject the application. Approval is subject to meeting all regulatory requirements and demonstrating the ability to operate as an EMI.
- Conditions: In some cases, the FCA may grant approval with certain conditions that must be met within a specified time frame.
6. Post-Approval Requirements
Time Frame: 1-2 months
- Final Preparations: Completing any outstanding requirements or conditions set by the FCA, such as additional capital requirements or finalizing safeguarding arrangements.
- Operational Readiness: Ensuring all systems, controls, and processes are in place to commence operations as an EMI.
Summary
In total, the process of obtaining an EMI license in the UK can take approximately 8 to 12 months, from the initial preparation phase to receiving final approval and meeting post-approval requirements. The timeline can vary based on the complexity of the application, the readiness of the applicant, and the responsiveness to FCA queries.
To streamline the process and avoid delays, it is crucial for applicants to thoroughly prepare their documentation, engage with experienced advisors like Legalaes, and maintain open communication with the FCA throughout the application process.
Advantages of the EMI license in UK
01
Prestigious Licensing
Access SWIFT transfers, issue Visa or MasterCard payment cards, and transfer payments worldwide in multiple currencies.
02
CHAPS Access
Provide payments within the UK through the efficient and reliable CHAPS system.
03
Straightforward Regulations
Benefit from a streamlined and optimized licensing process, as the UK was among the first to implement an EMI regulations.
04
Regulatory Recognition and Credibility
Regulatory Approval: An EMI license from the Financial Conduct Authority (FCA) signifies that the institution meets rigorous regulatory standards, enhancing the business’s credibility and reputation in the market.
Consumer Trust: Customers and partners are more likely to trust and engage with licensed institutions, knowing that they are regulated and compliant with industry standards.
05
Operational Flexibility and Scalability
Broad Range of Services: EMIs can issue electronic money and provide various payment services, such as payment processing, money remittance, and issuance of prepaid cards, allowing for a diverse service offering.
Innovation and Growth: The license enables companies to innovate and expand their product offerings, keeping pace with technological advancements and market demands.
06
Market Access and Expansion
European Economic Area (EEA) Operations: Although Brexit has affected passporting rights, UK-based EMIs can still explore opportunities to operate across the EEA by establishing subsidiaries or seeking additional licenses in EEA countries.
Global Reach: An EMI license allows businesses to tap into global markets, offering cross-border payment solutions and expanding their customer base.
07
Tax Efficiency and Financial Benefits
Potential Tax Benefits: Depending on the business structure and operations, EMIs might benefit from various tax reliefs and incentives, such as R&D tax credits for innovative fintech developments.
Capital Efficiency: EMIs can leverage the funds received from customers for issuing electronic money, provided they comply with safeguarding requirements, potentially improving capital efficiency.
08
Competitive Edge
Differentiation: Having an EMI license sets a company apart from non-licensed competitors, highlighting its commitment to regulatory compliance and operational excellence.
Attracting Investment: Licensed EMIs are more attractive to investors and venture capitalists due to the regulatory oversight and reduced risk associated with their operations.
09
Customer Protection and Compliance
Safeguarding Funds: EMIs are required to implement stringent safeguarding measures to protect customer funds, ensuring that clients’ money is secure and available even in the event of the institution’s insolvency.
Compliance with AML/CTF: EMIs must adhere to anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, fostering a secure and compliant financial environment.
07
Technological and Operational Benefits
Access to Fintech Ecosystem: EMIs can integrate with various fintech platforms and services, enhancing their technological capabilities and operational efficiencies.
Regulatory Sandbox Participation: The FCA’s Regulatory Sandbox allows EMIs to test new products and services in a controlled environment, facilitating innovation while managing regulatory risks.
08
Enhanced Customer Experience
Seamless Payment Solutions: EMIs can offer seamless and efficient payment solutions, improving customer satisfaction and loyalty.
Customization and Personalization: The ability to issue electronic money and manage payment services enables EMIs to offer customized solutions tailored to the specific needs of their customers.
09
Brand Enhancement
Reputation Building: Holding an EMI license enhances a company’s brand, associating it with trust, reliability, and regulatory compliance.
Marketing Advantage: Licensed EMIs can leverage their regulated status in marketing campaigns to attract new customers and partners.
Links for legislation related to EMI business in UK
Establishes the legal framework for the issuance and operation of electronic money institutions in the UK, setting out core principles and operational standards.
Defines regulatory requirements for payment services in the UK, focusing on making payments safer, more efficient, and enhancing consumer protection.
Governs the interchange fees for card-based payment transactions, ensuring transparency and fairness in the fees charged between payment service providers.
Comprehensive legislation covering the regulation of financial services and markets, including provisions relevant to EMIs.
Amends existing regulations to reflect changes in the electronic money, payment services, and payment card interchange fee sectors.
Sets out the measures to prevent money laundering and terrorist financing, including the transfer of funds and information requirements for payers.
Updates the 2017 regulations to incorporate new international standards and address emerging threats.
Provides the legal framework for the recovery of criminal assets, including measures against money laundering and the financing of terrorism.
Regulates the processing of personal data, ensuring privacy and protection for individuals within the UK.
These descriptions provide a quick overview of each act’s main purpose and its role in the regulatory landscape for obtaining EMI license in UK.
Taxation of EMI Companies in UK
The taxation of Electronic Money Institutions (EMIs) in the UK involves several layers, including corporation tax, VAT, and other relevant tax obligations. Here’s a comprehensive guide to understanding the key tax aspects for EMI companies operating in the UK:
1. Corporation Tax
1. Corporation Tax
EMIs in the UK are subject to corporation tax on their profits. Key points to consider include:
- Corporation Tax Rate: As of 2024, the standard corporation tax rate in the UK is 25% on taxable profits. A lower rate of 19% applies to companies with profits not exceeding £50,000.
- Taxable Profits: This includes income from issuing electronic money, payment service fees, interest income, and any other business activities.
- Deductions: EMIs can deduct business expenses, including operational costs, salaries, marketing expenses, and certain capital expenditures, to arrive at their taxable profits.
- Loss Relief: EMIs can carry forward trading losses to offset against future profits or carry back losses to previous tax years under certain conditions.
2. Value Added Tax (VAT)
2. Value Added Tax (VAT)
The VAT treatment of EMIs depends on the nature of their services:
- Exempt Supplies: Issuing electronic money and providing payment services are generally exempt from VAT under UK law. This means that EMIs do not charge VAT on these services, but also cannot reclaim VAT on related expenses.
- Standard-Rated Supplies: Any other services provided by EMIs that do not fall under financial services exemptions may be subject to standard VAT at 20%.
- Partial Exemption: EMIs making both exempt and taxable supplies may need to use a partial exemption method to determine the proportion of input VAT that can be reclaimed.
3. Withholding Tax
3. Withholding Tax
- Interest Payments: If an EMI pays interest on deposits or loans, it may need to consider UK withholding tax rules. Generally, UK-sourced interest paid to non-residents is subject to a 20% withholding tax unless reduced by a double tax treaty.
- Royalties: Payments of royalties by EMIs to non-residents may also attract withholding tax, subject to applicable treaty reliefs.
4. Dividends Tax
4. Dividends Tax
- Dividends paid to UK residents are subject to dividend tax rates, which start at 8.75% and vary depending on the taxpayer’s total income.
- There is no withholding tax on dividends paid to non-UK residents.
5. Employment Taxes
5. Employment Taxes
EMIs must comply with tax obligations related to their employees:
- PAYE (Pay As You Earn): EMIs must deduct income tax and National Insurance Contributions (NICs) from employees’ salaries under the PAYE system.
- Employer NICs: Employers are also liable for secondary NICs on employee earnings above a certain threshold.
6. Stamp Duty and Stamp Duty Reserve Tax (SDRT)
6. Stamp Duty and Stamp Duty Reserve Tax (SDRT)
- Share Issuance: Issuance of shares by EMIs is generally exempt from stamp duty.
- Share Transfers: Transfers of shares in an EMI may be subject to stamp duty or SDRT, typically at a rate of 0.5% of the consideration paid.
7. Capital Allowances
7. Capital Allowances
EMIs can claim capital allowances on qualifying capital expenditures, such as IT infrastructure and office equipment, which reduce their taxable profits:
- Annual Investment Allowance (AIA): Provides a 100% deduction for qualifying capital expenditure up to a certain limit.
- Writing Down Allowances (WDA): Allows for the deduction of a percentage of the remaining value of qualifying capital expenditure annually.
8. Transfer Pricing
8. Transfer Pricing
- Arm’s Length Principle: EMIs must ensure that transactions with related parties are conducted at arm’s length, i.e., at market rates, to comply with transfer pricing rules.
- Documentation Requirements: Proper documentation supporting transfer pricing policies must be maintained and provided to HMRC upon request.
9. Double Taxation Relief
9. Double Taxation Relief
Double Tax Treaties: The UK has a wide network of double tax treaties that can provide relief from double taxation on income earned abroad or by foreign entities. EMIs should be aware of relevant treaties to optimize their tax position.
10. Tax Compliance and Reporting
10. Tax Compliance and Reporting
- Tax Returns: EMIs must file annual corporation tax returns and pay any tax due within 9 months and 1 day after the end of their accounting period.
- VAT Returns: Quarterly VAT returns must be submitted if the EMI is VAT-registered.
- Real-Time Information (RTI): For PAYE, EMIs must submit real-time information to HMRC each time they pay their employees.
Understanding and navigating the complex tax landscape is crucial for EMIs to ensure compliance and optimize their tax liabilities. Consulting with tax professionals who specialize in financial services can provide valuable guidance tailored to the specific needs and circumstances of EMI companies.
FAQ about EMI license in UK
1. Why choose the UK for starting your EMI venture?
The UK is renowned for its prestigious finance and banking sector, making it a highly attractive destination for establishing an Electronic Money Institution (EMI). Obtaining an EMI license in the UK enhances your credibility, attracting investors, partners, and clients. Furthermore, it allows you to legally offer services within the UK, leveraging the country’s robust financial infrastructure.
2. Who would be suitable to apply for a UK EMI license?
The Financial Conduct Authority (FCA) assesses applicants based on their reputation, prior experience in the financial sector, and potential contributions to the UK economy. While there is no definitive profile, candidates must demonstrate compliance with regulatory standards and the ability to add value to the financial landscape.
3. I'm licensed in other jurisdictions as a payment provider, would that help?
Yes, having a license from another country indicates compliance with international regulations and serious intent to expand your business. This background can expedite the application process and enhance your credibility with the FCA.
4. Would I be able to utilize the CHAPS system?
Yes, holding a UK EMI license allows you to utilize the Clearing House Automated Payment System (CHAPS), which is essential for high-value, time-critical payments. CHAPS provides efficient, irrevocable sterling payments and is integral to the UK’s financial system, supporting both high-value and cross-border transactions.
Each of our projects receives unique and tailored solutions in accordance with the initial objectives and vision of the shareholders.
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