Revolut and Monzo say scrap stamp duty as top fintechs launch bid to boost stock market

Revolut and Monzo are among a group of top fintech firms urging the government to ditch its contentious tax on share trading today as part of a sweeping call for reform to boost the appeal of the London Stock Exchange.

The Unicorn Council for UK Fintech (UCFT), a group launched by industry body Innovate Finance last month, has drawn up a list of policy asks as part of efforts to improve perceptions of the fintech sector, boost fundraising and make London more attractive for firms to list.

The group comprises CEOs and founders of the UK’s largest fintech firms with a combined valuation of more than £50bn. Members include Revolut, Monzo, Zilch, Clearbank, Primarybid and Oaknorth.

In its list of priorities, shared exclusively with City A.M., the group called for “a rethink of the regulatory approach” to the fintech sector and laid out a list of tax and policy changes that would help boost growth.

“Everyone from the industry but also both parties has an appetite to make sure this thriving sector of our economy is succeeding, but there hasn’t necessarily been a playlist for government, policymakers and regulators to execute on the areas that we need to be improving,” Innovate Finance’s chief executive and UCFT co-chair Janine Hirt told Morning Wire

Despite “some great steps forward over the last few years”, regulation was “not keeping pace with innovation” like some other countries, Hirt warned.

Among the group’s asks are a push to address “gaps” in capital supply for the stock market and the abolition of the Stamp Duty on buying shares, which it said was penalising investors looking to back London-listed firms.

“You’re paying a fee to buy UK stocks, and it’s free to buy US stocks. It’s no wonder you have retail investors buying Tesla instead of Rolls-Royce,” Philip Belamant, chief executive of Zilch and UCFT co-chair, told Morning Wire

In its policy proposals, the UCFT said the tax should be “abolished” and not applied to the UK’s new PISCES market, where firms will be able to trade shares while remaining private.

The tax has been contentious in City circles over the past year and is cited by many as a barrier to cash flowing into the market. However, the Treasury has resisted the efforts and describes the tax as a revenue raiser that allows it to invest in public services.

“Stamp Taxes on Shares are carefully designed to raise revenue to help fund public services – contributing billions each year – without damaging the ability of businesses to access capital or impede London’s position as a global centre for listing companies,” a spokesperson told Morning Wire

The push for reform from the likes of Revolut, Monzo and Oaknorth may unnerve some in the Square Mile however as regulators and policymakers look to tempt in more listings from growth technology firms.

All three homegrown digital banks are among the most hotly anticipated listing prospects and any move to float overseas would be seen as a major blow to the capital. Buy-now pay-later firm Zilch is similarly seen as a prime target for a float in the next 12 months and has been open in its ambitions to IPO.

Belamant also called for “visibility on where pension funds are putting their money”, adding: “We need to see them buying UK stocks.”

The Treasury announced last month that pension funds will have to publicly disclose their level of investment in the UK as part of drive to direct more capital to the stock market. Hirt said that while UCFT does not yet have a firm position on whether it is backing these new rules, it was “really keen to understand where the money is going from those pension firms”.

Under the so-called Mansion House compact, the UK’s biggest defined contribution pension schemes have also pledged to invest at least five per cent of their assets in growth companies by 2030.

Hirt added: “It’s absolutely astonishing that we’ve got pension funds from all over the world looking at our fintech ecosystem, but we’re not seeing that same type of messaging happening on a domestic basis.”

In a statement alongside the policy asks, Revolut’s new UK chief executive Francesca Carlesi said: “It is important that the UK’s fintech unicorns use their experience to make sure that the UK keeps attracting and growing the next generation of innovators.”

Charles McManus, CEO of Clearbank and UCFT co-chair, added he was “determined to use the lessons [he] has learned” to ensure that the UK has the “best business and regulatory environment for the sector.”

The comments come as the industry prepares to gather for Innovate Finance’s 2024 Global Summit in London today in which firms will discuss the political and regulatory environment for the sector.

The group’s asks today are likely to inform of much of the policy discussion across the week. Among its wider list of proposals, UCFT called for R&D tax relief to explicitly include the work of fintechs, and for the Enterprise Management Incentives (EMI) and Enterprise Investment Scheme to correct the exclusion of financial start-ups.

On tax measures, the group has called on the government to increase and broaden the scope of Business Asset Disposal Relief, saying it “will not attract or incentivise the ambitious entrepreneur to the UK, or the successful founder to reinvest in a new venture”.

The scheme allows businesses to pay 10 per cent in capital gains tax on qualifying profits when selling all or part of its assets, down from the usual 20 per cent for higher-rate taxpayers. The tax break has a limit of £1m, reduced from £10m in 2020.

UCFT argued that the VAT-exempt status of most fintechs means they must raise 20 per cent more capital than other start-ups, calling for a VAT-rebate scheme for earlier stage fintechs “to level the playing field”.