The FCA has also issued a consumer warning against Binance.com. The financial regulator has advised people to be cautious of advertisements that promise high returns on crypto asset investments. The move comes as part of a pushback from global regulators against crypto-currency platforms.

 Binance is an online exchange where users can trade cryptocurrencies. The site offers its users a range of financial services and products and provides each trader with a crypto wallet where they can store digital funds. The online exchange also aids traders in their investment decisions through supporting programmes. 

 Binance Group was initially based in China but has since relocated to the Cayman Islands due to China’s increased regulation of cryptocurrency. Binance Markets Limited (BML_ is an affiliate firm of Binance, currently based in London.

 The FCA has said that BML is not currently permitted to undertake any regulated activities within the UK without prior written consent by the FCA. The firm has been given until Wednesday to comply with the ruling, with the FCA also stating that no entity of the Binance Group has the authority, registration, or licence to conduct regulated activity in the country. 

 The FCA does not regulate cryptocurrencies, but it does regulate crypto assets. To advertise or sell cryptocurrency products in the UK, companies must be authorised by the financial regulator.

On Thursday, the UK government announced revisions to its green travel list. From 4 am on June 30, Malta, Madeira, several UK Overseas territories, the Balearic Islands, and Caribbean Islands will be added to the government’s green list. No quarantine period is required for travellers returning to the UK from these destinations.

Following on from the announcement by the UK government, stocks in Europe rose. In London, the FTSE 100 (^FTSE) increased 0.2%. In France, the CAC (^FCHI) rose by 0.1%. In Germany, the DAX (^GDAXI) was flat.

Grant Shapps UK transport secretary, said that the government was planning to abandon quarantine for fully vaccinated travellers from amber list countries, but not until later in the summer months. The change will occur in gradual phases. Mr Shapps has thanked the UK’s successful vaccination programme for enabling the gradual reopening of foreign travel from and to the UK.

On Thursday, Visa agreed to acquire Tink in a deal that aims to boost digital ambitions by the financial services giant. Back in January, Visa had attempted to buy Plaid. However, the takeover was abandoned after the US Department of Justice blocked the sale on antitrust grounds. Plaid, recently valued at $13.4 billion, has since gone it alone as an independent company.

Both Plaid and Tink are open banking platforms, a concept which invites lenders to consensually provide third-party firms with access to consumer baking data. Tink was founded back in 2012, with the goal of changing the banking industry for the better. Its technology allows banks and fintech firms access to the banking data needed to create new financial products. The Swedish-based company was recently valued at €680 million, as open banking thrives in the UK and EU thanks to new regulations.

On Monday, Goldman Sachs announced it has launched its transaction bank in Britain, despite the US banking giant previously warning that a troublesome Brexit would negatively impact its funding in the nation. After launching the business in the US last year, Goldman Sachs is keen to expand as it seeks stable sources of revenue beyond its investment banks.

Goldman Sachs has said its US transaction banking business has already attracted over 250 clients since June last year. The company has seen over $35 billion in deposits and has had trillions processed through its systems. Goldman Sachs is excited to bring transaction banking to the UK as it expands its client reach.

The US banking giant is attempting to compete with rivals such as JPMorgan, which already offers a wide selection of services to corporate clients. Goldman Sachs hopes to attract clients who are currently using older systems to its new digital cash management systems.

Morrisons is preparing for takeover negotiations following its rejection of a £5.5 billion ($7.6 billion) bid from Clayton Dubilier & Rice (CD&R) at the weekend. In a statement, Morrisons said that its board evaluated the private equity firm’s conditional proposal with the aid of its financial adviser, Rothschild & Co. However, Morrisons concluded that CD&R’s offer "significantly undervalued Morrisons and its future prospects" and thus rejected the offer on 17 June. Shares in the UK supermarket jumped over 30% as the news of the rejection broke.

CD&R, however, reportedly remains confident that a deal can be made. In a statement, the private equity firm confirmed the possibility of a cash bid. Under UK takeover rules, CD&R has until 17 July to announce a firm intention to make an offer.

According to data from EY,  the UK acquired 99 investment projects in financial services in 2019. However, in 2020, just 49 were acquired, a significant drop that puts the country only 14% ahead of France. 

The latest EY UK Attractiveness Survey for Financial Services found that foreign investment fell by 23% across Europe in 2020, as the pandemic impacted business confidence and foreign travel. It is expected that the UK will continue to outperform its European neighbours as global markets and economies begin to recover from the economic impacts of Covid-19. In a survey of global investors, the UK was found to be the European country with the most investment-friendly Covid-19 recovery plans. It was also labelled most attractive for financial services investments. 

Germany came second on both of these assessments, with France and Switzerland coming in joint third place. London remains Europe’s most attractive destination for financial services foreign investment after Stockholm and Amsterdam.

During the few first months after Brexit, the UK exported more food and drinks to countries outside the EU than countries in the EU as exports to the bloc plunged. According to the Food and Drink Federation (FDF), in the first three months of 2021, sales to non-EU countries made up 55% of all UK food and drink exports. A year prior, this figure sat at just 40%.

The FDF also said that exports to non-EU countries only rose by 0.3%. This means that overall exports of UK food and drink have dropped to £3.7 billion from 5.1 billion this time last year. Dairy exporters have been hardest hit. Exports of milk and cream to Europe dropped over 90%, with cheese exports falling by two-thirds. Dominic Goudie, the federation’s head of international trade, has called the loss a disaster. However, the Food and Drink Exporters Association's John Whitehead commented that the drop will partially be due to European importers having stockpiled goods ahead of Britain’s exit from the EU.

According to research by Hamptons, for the first time in over six year, it is now cheaper to rent a property in the UK than it is to buy a property. The estate agency has revealed that pre-pandemic, buyers with a 10% deposit would have been better off than renters by £102 each month. However, this trend was reversed by the pandemic. Although rent prices in Britain have risen by 7.1% over the past 12 months, strong house price growth alongside increases in higher loan-to-value mortgage rates have increased the cost of buying a property. As such, it will now be cheaper for the typical first-time buyer to rent than to buy on a month per month basis.

In May 2021, it was 7% cheaper for the typical first-time buyer (with a 10% deposit) to rent a home than it was to purchase. In the UK, there now remains just four areas where buying a property is more affordable than renting: Scotland, the North East, the North West, Yorkshire, and Humber. The shift is a huge contrast to May 2020, when rental demand dropped as younger adults returned to their family homes during the start of the pandemic. The restrictions resulted in reduced funds for many young adults, and the lockdown made city living less appealing. In early 2020, buying was cheaper than renting in every region of the UK. 

Members of trade bodies, academia, and NGOs will make up the task force, known as the Green Technical Advisory Group (GTAG). The GTAF will be responsible for overseeing the government’s delivery of a “Green Taxonomy”. This common framework will offer comprehensible standards that lay out when a financial product or investment can be classed as environmentally sustainable. 

In recent years, green financial products have surged in demand, but this has also given rise to greenwashing within the financial sector. There are concerns that some green financial products fail to deliver their promises of environmental sustainability. These concerns are only exacerbated further by increased cases of allegedly green investment funds that are later found to support carbon-intensive businesses. 

 The government’s proposed Green Taxonomy aims to stamp out greenwashing within the sector while simultaneously making it easier for consumers and investors to understand the impact that a particular company or product is having on the environment. 

Ian Bradbury, CTO for Financial Services at Fujitsu UK & Ireland commented: “As financial organisations strive to provide great customer experiences, the emphasis must also be on how they align their services with customers’ ethical and social beliefs. What’s more, it’s an opportunity to position the business as a trusted pillar of society; empty promises on CSR are no longer enough. This is something Natwest recently demonstrated with its ‘green mortgage’, offering individuals who purchase an energy efficient property a preferential interest rate on their home loan.”

“Undoubtedly, environmental concerns resonate with large proportions of consumers who continue to champion climate change. IBM recently found that 90% of consumers feel that the COVID-19 pandemic affected their views on environmental sustainability. Now, the financial services industry needs to take these concerns as a serious priority,”  Bradbury said.

This ongoing disruption, coupled with changing consumer behaviour characterised by the growing preference toward mobile and online services, is driving regulatory changes that are shaping the future of finance.

While this is happening to varying degrees in regions and countries around the world, there are local nuances to consider. This is particularly true in the United Kingdom, where speculation is rife around what the future will hold for the UK following its departure from the EU and the impact this will have on financial services.

As one of the world’s leading financial centres, the UK is well-positioned to keep pace with changes in the industry. But in terms of regulations, there are still several questions around how the UK will adapt, what legislation it will adopt or modify, and what impact this may have on the wider EU region.

Post-Brexit PSD2

The Payment Service Directive 2 (PSD2) has been a linchpin of European financial regulations since its introduction in 2018, increasing security for online transactions and encouraging more competition through open banking.

The transition period ended on 1^st January 2021 and enforcement of PSD2’s Strong Customer Authentication requirements for merchants will take effect at different times. The EU’s deadline is on 1^st January 2021 while the UK’s is on 14^th September 2021, which will no doubt cause a great deal of confusion for consumers.

It’s well known that digital currencies have – in their relatively short history – been used for illegal activities, so building trust in the technology through compliance will be a key focus for regulatory bodies in the future.

In the case of a no-deal Brexit, a draft version of the UK Financial Conduct Authority’s (FCA) Regulatory Technical Standards on Strong Customer Authentication and Common and Secure Open Standards of Communication indicates that the UK regulators would continue to accept the EU’s eIDAS certificates (or electronic Identification, Authentication and Trust Services) for authenticating third-party providers to banks. However, the document also recognises that UK entities may require alternative methods, suggesting that both routes are still on the table.

Discussions are still ongoing, but time is running out. As security is a key component of the directive, mandating the use of transaction risk analytics and replication protection in mobile apps, any new UK-specific variant will have to ensure that consumers remain protected and banks can still offer fully seamless digital experiences.

Driving digital identities

Some of the biggest regulatory developments throughout 2020 have come in the area of identity verification, with COVID-19 accelerating digitisation initiatives and investment. As an increasing number of customers are either reluctant or unable to visit a bank branch, fully digital and seamless identity verification has become a key requirement for remote account opening and onboarding.

This is an area where regulations – such as Know Your Customer (KYC) – play a key role, and where authorities have had to move quickly. For example, in response to the pandemic, the UK FCA issued guidance on digital identity verification permitting retail financial firms to accept scanned documentation sent via email and ‘selfies’ to verify identities.

This was supplemented by a 12-month document checking service pilot launched by the UK Government in the summer. Participating private sector firms can digitally check an individual’s passport data against the government database to verify their identity and help prevent crime.

And this is just the beginning. There are plans for private-sector identity proofing requirements and work being done to update existing identity-checking laws to become more comprehensive. Perhaps most significantly, the UK government plans to develop six guiding principles to frame digital identity delivery and policy: privacy, transparency, inclusivity, interoperability, proportionality, and good governance.

This all points towards a financial future that will be driven by digital identities. With customer behaviour likely changed forever, digital identity verification will be essential to improving the remote onboarding experience, while also minimising the threat of fraud and account takeover attacks.

The evolution of AML

Anti-money laundering (AML) legislation is also set to progress in the future, driven largely by an increasing focus on cryptocurrencies. Digital currencies are currently garnering plenty of attention from European regulators, as illustrated by the introduction of the 5^th Anti-Money Laundering Directive (AMLD5).

EU member states were required to transpose AMLD5 into national law by the beginning of the year, with the goal of preventing the use of the financial system for money laundering or terrorist financing. One of the directive’s key provisions focuses on restricting the anonymous use of digital currencies and, as such, it now applies to both virtual cryptocurrency exchanges (VCEPs) and custodian wallet providers (CWPs).

VCEPs and CWPs that were previously unregulated must now follow the same rules as any other financial institution, which includes mandatory identity checks for new customers.

With the role of cryptocurrencies in our financial system expected to increase significantly over the coming years, we can expect European regulations to continue in this vein – particularly in a leading FinTech nation like the UK. It’s well known that digital currencies have – in their relatively short history – been used for illegal activities, so building trust in the technology through compliance will be a key focus for regulatory bodies in the future.

2020 has certainly been a year of upheaval for financial services regulations and we can expect this trend to continue into the new year. With digitisation in the industry evolving at a rapid rate, governments and lawmakers will have to work hard to keep pace. As the EU and the UK have shown, the future of finance will have plenty to offer.

Allan started his career with a Big Four accountancy firm, where he spent 18 months on an assignment in Tokyo. When he joined Buzzacott, his focus moved away from the typical corporate engagements of the Big Four world, and onto a private client-oriented portfolio. His typical client now is the individual, rather than the employer, which is much more personal and means there’s a lot more he can do to help. We caught up with Allan to hear about how the pandemic, Brexit and the Biden-Harris administration have affected relocations to the UK and US.  

 How are recent events affecting relocations to the UK and the US?

The pandemic’s definitely diminished international travel at the moment, but it’s hard to say how the norms of travel and migration will be affected in the long-term. Now we‘re all used to having meetings remotely, it’s possible business travel will never quite get back to how it was. However, the vaccination programs are underway and we can see the light at the end of the tunnel (however distant it may be), so many people will be hoping to start booking flights again.

Brexit may cause a reduction in migrations to the UK from the European Union, but it’s possible this will be offset by increased migrations from other locations. Similarly, recent political developments in the US may have a long-term impact on the rate of migration there, but it’ll be interesting to see how things change under the new administration.

In any case, the enquiries keep coming in, and many people still see the UK and the US as places where they can build a great future for themselves and their families, whether temporarily or for the long-term. With some of the top schools and universities in the world, education is often a driver for families to relocate. Others are drawn by exciting opportunities for developing their businesses or careers in the great financial centres of London and New York, or in the tech hub of Silicon Valley.

How should individuals prepare for a move to the UK or the US from a tax perspective?

There’s a lot to consider before moving to a new location, and each person will have their own particular circumstances and objectives. It’s important to obtain detailed bespoke advice well before you become resident for tax purposes. Seeking advice at least three months before relocating is what we usually recommend, but preferably longer so you have time to implement the advice you’re given before it’s too late.

Firstly, you should understand exactly when tax residence is triggered so you can determine the date your planning needs to be completed. The US rules consider the number of days of physical presence over a three-year period, so if you’ve visited there before you relocate, this could bring forward the date that your residence begins. There’s also the ‘Green Card’ test. If you have a valid Green Card, you’ll become resident from the first date that you arrive in the US after the Green Card is issued.

The UK has a much more complex series of residence tests. As well as the number of days you’re present in the UK, you need to consider the number of ties you have - these are things like homeownership, family ties or time spent working in the UK. There’s also a distinction between domicile and residence which is important to factor in. ‘Domicile’ relates to your long-term home whereas ‘residence’ is much more about where you are right now.  If you have a domicile of origin in the UK, you will be taxable on your worldwide income and gains from the moment you become resident there but if you are non-UK domiciled, you may be able to spend a period of time in the UK with no tax on your offshore income and gains. If this is a possibility, you’ll benefit from specialist advice on how to arrange your affairs to utilise the opportunity.

After understanding your residence/domicile status, the remaining points to consider before relocating are:

• Do you have assets with unrealised gains that could be sold or rebased before you relocate or assets that would be taxed punitively after you relocate? Both the UK and the US have a tax on capital gains and they both have rules that target certain types of overseas investment, making them unsuitable once you become resident there.
• Do you own real estate in your country of origin and what do you intend to do with it when you move?

If you wish to sell property in your home country, it may be advisable to do so before moving. If you plan to keep the property and rent it out, you should consider how the rental income would be taxed in the UK or the US after you become resident there.

• Do you intend to work after moving and where will you be performing the duties of your employment? Consider how your income will be taxed, whether social security contributions may be payable by you and your employer, and what exemptions might be available with the right planning. If you own a business in your home country, the profits may become taxable in your new country of residence, regardless of whether you take a salary or dividends. With careful planning before you move, it may be possible to save some tax.
• Both the US and the UK have an estate tax. If your assets have a total market value on the date of your death exceeding any exemptions that may be available, your estate will be taxable. Currently, both jurisdictions levy a tax at 40% of the estate, which can significantly deplete the value of your assets as you pass them onto the next generation. For many, this will be the most important consideration for long-term tax planning.
• Are you the grantor/settlor or beneficiary of a trust? If so, you need to understand how trust income and gains are treated after you become resident and what tax-saving opportunities there may be with the right planning.
• Finally, you’ll probably need to file tax returns once you have relocated. This is likely to be complicated and it’s important to ensure you’re fully compliant to avoid significant penalty exposure.

What are the benefits of consulting an expatriate tax expert?

The above list is by no means exhaustive, but it covers most of the initial questions to ask yourself if you’re planning to move to the UK or the US. The answers to those questions may lead to further questions, and you might even end up uncovering your most important challenges as you discuss your relocation with your tax adviser. Also, even after your relocation, your circumstances or the tax rules could change, which is why it’s generally recommended you retain the ongoing services of a good tax adviser, who’ll be able to keep you in the know regarding any changes that might affect you.

Tax hikes

Chancellor Rishi Sunak has unveiled a major tax hike in the 2021 budget – with corporation tax on company profits rising by 6% to 25% in 2023. Darren Upson, VP Small Business Europe at Soldo has commented: “While the Chancellor understandably needs to raise revenue to pay off the eye-watering amounts of cash borrowed throughout the course of the pandemic, we nonetheless worry about the timing of these tax hikes. In the context of Brexit, the government needs to ensure the UK remains an attractive destination for business. The last thing it ought to be doing is risking putting off investors and entrepreneurs with what may be perceived as a punitive tax regime. Another crucial concern is that these tax hikes may discourage SMBs from hiring. With unemployment creeping up, this move could ultimately prove to be counterproductive.”

Melissa Christopher, Executive Director at ZEDRA, argues the opposite:

”While the corporation tax rate increase is disappointing, it was inevitable that tax rises would happen and it primarily affects groups of companies that are profitable. The revised loss rules will help those companies who have struggled during the pandemic and will take a couple of years to recover.

“We rarely welcome tax increases, but tax certainty is helpful for international businesses as they plan their own budgets and revise business arrangements in the recovery period. The fact that the increase is not until 2023 will allow sensible business planning. No group should be making decisions on headline tax rates alone, and now is perhaps the best time to make reasoned and educated assessments of long-term expectations.

“International companies looking to expand to Europe will look at the UK as a successful economic location, with a motivated and educated workforce, and a stable business environment; the latter is particularly crucial in these turbulent times. 

The extension of the furlough scheme

“The Chancellor’s decision to extend furlough [until September] will be hugely welcome for firms who’ve continued to struggle through this latest lockdown, but this solves just one part of a much bigger problem.

“Many workers being kept on the scheme will now be feeling huge financial and mental strain resulting from prolonged job insecurity and reduced pay, meaning businesses taking advantage of the extension need to have robust support in place for this section of their workforce. Even if you already have a benefits and wellbeing strategy in place, it’s well worth reassessing people’s current needs and priorities, as it’s more than likely you’ll find certain resources could be better utilised moving forward.

“The Prime Minister’s roadmap out of lockdown put the return of ‘normality’ firmly on the horizon, so when we eventually make it through the other side it will be just as important to have measures in place to support employees through the lasting effects of the pandemic. Workers have been incredibly loyal during a tough year, so these decisions should not be taken lightly.”

-Steve Bee, Director of WorkLife by OpenMoney

The extension to the stamp duty holiday and introduction of a government-backed 5% mortgage

“The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just 5% reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained.”

-Tom Brown, Managing Director of Real Estate at Ingenious

Help to Grow

“We applaud the government’s new £520m Help to Grow scheme, which aims to help small and medium-sized businesses boost their productivity. It’s particularly exciting to see the digital element of this, with the offer of technology advice and discounted software. This is exactly the kind of creative thinking required to get businesses back on their feet.

“It’s good to see the government offering guidance and channelling resources towards a specific and sensible direction, rather than simply throwing money at businesses and hoping for the best. It’s clear that digitisation and cloud-based operational models are the way of the future, and businesses that don’t embrace this are going to have a difficult time competing in the post-COVID era. Finance decision-makers, in particular, ought to use this ‘great pause’ to reassess their business and payments strategy, ensuring that these are fully optimised for life beyond the lockdown.”

-Darren Upson, VP Small Business Europe at Soldo

The £100m investment in the HMRC taskforce

“This is a positive announcement by the Chancellor and more than 1,000 new investigators may go some way to recouping the £billions which have been lost to fraud over the past 12 months of the coronavirus crisis.

“There’s no doubt that extra resources are much in need, particularly as the Chancellor has also announced a new Restart fund for businesses to replace the Bounce Back loans, which was wide open to fraud.

“But it’s also vital that a significant amount of that £100m investment goes into the systems used by HMRC to find those responsible for fraud. Without the use of the latest digital platforms to run ID checks and verify information on a global scale, these investigators will be in danger of just becoming busy fools.”

-John Dobson, CEO at AML specialists SmartSearch

The wider implications for the FinTech industry

“In the face of adversity, the UK FinTech industry has proven its resilience, attracting $4.6bn in VC investment last year despite the challenges and uncertainty caused by the pandemic. But safeguarding this growth and establishing the UK as a world leader in FinTech will require us to cultivate an attractive and prosperous environment for talent from all walks of life. 

The Chancellor’s ‘fast-track’ FinTech visa is a welcome step in the right direction and there’s no doubt that the Kalifa Review signals a commitment to long-term investment. However, true innovation comes through diversity of thought and background, and as a migrant myself, the budget was missing this final piece: a reassurance to foreign talent that there is a home for them in the UK FinTech community.”

-Daumantas Dvilinskas, CEO and Co-Founder, TransferGo

Contactless payment limit

“The single contactless limit for credit and debit cards will rise to £100, and cumulative contactless payments up to £300 (before the need for consumers to input their chip and pin). This change may cause a divide among consumers, some may celebrate the change whereas others could now be concerned about over-spending or fraud. It is wise for customers to keep a close eye on where their money goes and be aware of when they will be required to use their pin. Peace of mind is a definite benefit when using a credit card for shopping, either in-store or online, as consumers are protected under Section 75 of the Consumer Credit Act for payments of £100 or more. If shoppers struggle to pay back their balance, they would be wise to hunt down a decent interest-free credit card for extra breathing space to tackle the debt.”

-Rachel Springall, Finance Expert at Moneyfacts.co.uk

What was missing?

“In a number of ways, the budget did not have the sharp teeth so many feared. There was no mention of a wealth tax, no wholesale reform to the inheritance tax regime, no sign of the increases in Capital Gains tax that were thought inevitable and an extension to the SDLT holiday. That is not to say that the door has now closed on these changes; in fact, we think it remains wide open and that the Chancellor will turn his attention to some of them in due course. 

“It is also interesting to see the government’s forecast for inheritance tax receipts for the coming year has, for the first time, reached £6 billion. With this news and the OTS’ most recent report on the subject in hand, it remains an area we believe that is due for significant reform in the coming couple of years.”

- Tim Snaith, Partner at Winckworth Sherwood