Forex License in UK

Proven authority in the market.
A financial ecosystem with advanced technology and a strong regulatory framework has made the UK the epicenter of global forex trading. Forex licenses in the UK are held by the leading corporations in the industry.

Access to the EU area.
The EU Markets in Financial Instruments Directive (MiFID) Article 31 states that companies with European financial instruments can provide their services throughout the EU area.

Safe trading environment.
Investors trust forex brokers, as they can only obtain a license by meeting established standards, confirming the transparency of their operations, safeguarding funds, and adhering to AML/CFT.

Favorable taxation system.
For forex market participants, trading through Individual Savings Accounts (ISAs) is not subject to capital gains tax. Profits from spread betting are also exempt from taxation.

The FCA, based on the Financial Services and Markets Act (FSMA) of 2000, sets out the criteria and standards that an applicant must meet to be authorized to conduct forex activities in the territory. Failure to meet at least one of the UK forex license requirements may result in a negative decision of the Regulator.

Norms for obtaining a license:

• Start-up capital. UK forex license costs depend on the type of license: limited license – 50 000 euros, intermediary license (agency license) – 125 000 euros, dealer license (full license) – 730 000 euros.
• The presence of a legal local office
• The founder can be a non-resident
• The executive director must be physically located in the territory of authorization, have relevant experience, and pass FCA testing
• Full business disclosure: data on co-founders, and management.
• Business Insurance
• Submit business and financial forecasts for 3 years
• Draw up AML compliance procedure
• Issue a letter of recommendation from the bank

The stages of setting up a legal entity in the UK:

• Determine the name of the company, and register it at the Registration Chamber. There are certain prohibitions on the name: words consonant with the names of the royal family are not used. Most often choose the legal form of LTD.
• Hire staff, the director can be only one person (must be physically present on the territory of the state, during the process of reviewing documents, there are no requirements for citizenship), in the organizational structure must be a compliance officer, and his duties will include control over the implementation of all legal provisions of the enterprise and interaction with the Regulator.
• To pass the registration in the tax state body (VAT) and PAYE (social contributions).
• Register a legal entity in the commercial register (only after all fees have been paid).
• Open an account, is allowed to have a bank account in one of the EU countries.

Provided the documents are submitted correctly, registration may take from a week to 10 days. The Director and Compliance Officer must be in the United Kingdom during this time.

The FCA sets high requirements for the executive director, who must prove his qualifications, and experience in the financial market and reside in Britain (there are no citizenship requirements).

FCA criteria for the company’s office: availability of physical premises with all communications.

FCA standards for authorized capital: the amount depends on the chosen activity, but the entire amount must be deposited before filing the documents for registration.

Documents for a license are submitted to the FCA in English.

The set of documents includes:

• A correctly completed application form, on a form designed by the FCA
• A questionnaire with data about the company
• A questionnaire (Form “A”), which includes details of the managing and compliance officer
• All registration documents of the firm, its founders and key employees, UK forex license fees paid
• Detailed business forecast for 5 years
• A description of the organizational structure of the company, indicating the entire managing director and co-founders
• Financial report
• Company’s financial condition assessment form
• AML procedures

The regulator may require additional statements, reports, and certificates.

Types of Forex licenses in the UK

For financial companies engaged in trading, buying/selling currencies, and securities on the territory of Britain it is mandatory to obtain a Forex trading license UK.

Forex brokers can choose from the following categories:

• Dealer (market-making) or full license, which allows to conduct of full brokerage activities with all financial instruments
• Agent/Intermediary. Equivalent to an STP license. Operations are carried out via ECN.
• Limited authorization. It is possible to trade and market, but not to retain clients’ money.

Advantages of full and intermediary licenses:

• Issue contracts (CFDs) and earn income from the spread, markup of the price of currencies, futures
• Increases reputation in the market
• Increases the number of clients, investors

Advantages of unlimited license:

• Broker receives income from commissions
• Focus on marketing without managing clients’ capital, expand partnerships

Following reform in 2013, the Financial Services Authority (FSA), Britain’s financial market regulator, was renamed the Financial Conduct Authority (FCA) with expanded functions. The FCA is funded by levies from financial industry participants and has a head office in London and another in Edinburgh.

The FCA’s activities are based on the principles of the Financial Services and Markets Act 2000 (FSMA) as amended in 2012, the Markets in Financial Instruments Directive (MiFID II), and the FCA Handbook. The law stipulates that the actions of the Regulator should be aimed at maintaining financial stability, protecting the interests of clients, market integrity, and ensuring transparency of business conduct.

The FCA has enforcement teams within its structure that have the power to penalize companies for non-compliance with financial regulations. In their activities, they are guided by: The Anti-Terrorism Act 2008, Proceeds of Crime Act 2002, Market Abuse Regulation (MAR), Money Laundering, Terrorist Financing and Transfer of Funds Regulations (MLR 2017).

The FCA has a particular interest in offenses such as:

• Financial crime, market manipulation
• Unscrupulous behavior by a company
• Misconduct by the company’s management
• Conducting activities without proper authorizations

Taxation in Britain is handled by the HM Revenue & Customs (HMRC).
Tax on forex activities is determined automatically based on several factors (amount of income of the company, category of the company, etc.):

1. Income tax (from 20% to 45%), depends on the tax group
2. Capital Gains Tax (CGT) – 20%
3. Stamp duty (in case of buying shares)
4. Trading through an Individual Savings Account is tax-free, as is spread betting.