Accountants for fintech startups.

Fintech accounting has to handle regulatory capital, safeguarded customer funds and a share register that the Financial Conduct Authority (FCA) will review.

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We act for UK fintech startups. We keep client and safeguarded money separate from the company's own money in the records, keep regulatory capital at the level it needs to be, claim R&D relief on qualifying engineering work, and keep a share register that will stand up to an FCA change-in-control review.

Regulation by the Financial Conduct Authority (FCA) is what makes fintech accounting different. Customer money that passes through your business belongs to your customers, and it has to be recorded and held separately from the company's own money.

The regulator also looks at your balance sheet. Capital requirements have to be met at all times, and an FCA authorisation or change-in-control application will look closely at both your numbers and your ownership. A share register that has not been kept accurately from the start can hold up an application.

A worked example of the PAYE cap on a contractor-heavy claim

A loss-making UK fintech whose engineering is done mainly by UK contractors invoicing through their own companies. It is a small or medium-sized enterprise (SME) for R&D purposes (fewer than 500 staff, and turnover of no more than €100 million or a balance sheet of no more than €86 million, counting linked and partner businesses) and spends at least 30% of its total expenditure on qualifying R&D, so the intensive route is available. Qualifying R&D for the year: £500,000. PAYE and National Insurance for the year are £30,000, because few people are on the payroll. Its trading loss, after the extra R&D deduction, is at least £930,000.

Intensive route credit, before the cap: £500,000 × 186% = £930,000 of loss, at 14.5% = £134,850.
The cap: £20,000 + (300% × £30,000) = £110,000. The company does not qualify for the exemption, because its intellectual property is not created or managed mainly by its own employees.
What is paid: the credit is limited to £110,000. The company surrenders only the loss that produces it, £110,000 ÷ 14.5% = £758,621, and carries the rest of its loss forward as an ordinary trading loss.

With six of those engineers on payroll instead, and qualifying spend still £500,000, PAYE and National Insurance would be £120,000 and the cap £380,000, so the full £134,850 would be paid, which is £24,850 more cash that year. How you hire is decided long before the claim, so we model the cap before an R&D credit goes into a cashflow forecast.

Illustrative figures. We run the calculation on your own numbers before anything is filed.

Run your own numbers

What makes fintech accounting different

Client and safeguarded money: Funds held for customers belong to them and do not count as your revenue or your cash. Record them separately, as they are held separately in the bank, and reconcile them more often than once a month.
Regulatory capital: A capital requirement has to be met at all times, including between balance sheet dates. It limits how much you can spend on hiring or marketing, so build it into the cash forecast.
Different kinds of revenue: Card interchange fees, foreign exchange spreads, subscriptions and interest earned on customer balances are each recognised differently. Record them as separate lines so each one can be analysed.
A share register under scrutiny: A change in control needs FCA approval. The FCA examines who holds which shares and who counts as a controller, so the register has to be accurate.

R&D relief for fintech companies

The test is the same as in any sector. The work must seek an advance in science or technology by resolving uncertainty that a competent professional could not readily resolve. Building a well-made app on established frameworks does not qualify, and much fintech development is of that kind.

Work that tends to qualify includes transaction processing at a volume or speed where the standard architecture fails, fraud and risk models where it was unknown whether the approach would work, and integration with older banking systems that required experiment beyond the published documentation.

Fintech teams often use contractors, and the R&D credit paid for a year is capped at £20,000 plus 300% of your PAYE and National Insurance bill. Under the intensive route, a company whose credit would be higher surrenders only the loss needed for the capped amount and carries the rest forward as an ordinary trading loss. Under the merged scheme, the excess credit carries forward to the next accounting period. There is an exemption from the cap, but it needs two conditions to be met together: all or most of the work of creating or managing the company's intellectual property must be done by its own employees, and payments for subcontractors and externally provided workers from connected companies must be no more than 15% of qualifying R&D spend. Contractors who invoice through their own companies are normally unconnected, so a team made up mostly of contractors usually meets the 15% condition and fails the employee condition.

How we handle R&D claims SEIS and EIS

What we do for fintech companies

Client and safeguarded money separated in the records and reconciled regularly
Regulatory capital built into the cash forecast
Each type of revenue recorded on its own line
R&D claims with the PAYE cap, and both conditions for the exemption from it, modelled before you rely on the cash
A share register and record of people with significant control that will stand up to a change-in-control review
SEIS and EIS where the company qualifies, with advance assurance from HMRC obtained before you pitch

Common questions

Is client money part of our revenue?

No. Funds held for customers are neither your revenue nor your cash. Record them separately, as they are held separately in the bank, and reconcile them as often as the FCA's rules require.

Can a fintech claim R&D relief?

Often. Claims usually rest on transaction processing at a volume or speed where standard architecture fails, fraud and risk modelling where the outcome was unknown, or integration with older banking systems that required experiment. Building the app itself on established frameworks is ordinary product development and does not qualify.

Our engineers are contractors. Does that affect our claim?

Yes, in two ways. Payments for contractors from unconnected businesses generally count at 65% of their cost. And the credit paid for a year is capped at £20,000 plus 300% of your PAYE and National Insurance bill, which is small if very few people are on payroll. Under the intensive route, the loss not used for the capped credit is carried forward. There is an exemption from the cap, but it needs two conditions at once: all or most of the work of creating or managing the company's intellectual property is done by its own employees, and payments for subcontractors and externally provided workers from connected companies are no more than 15% of qualifying spend. Contractors invoicing through their own companies are normally unconnected, so a team of contractors usually meets the 15% condition and fails the employee condition. Model the cap before you write the credit into a forecast.

Do you handle FCA-regulated reporting?

We prepare the accounts and keep the capital and client-money position reconciled. A specific regulatory return or a client assets audit needs a firm with the relevant registration, and we will tell you when you need one.