VCM3040 | Excluded activities: banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities

ITA07/S192(1)(c); ITA07/S303(1)(c)

These sections exclude banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities.

The ‘other’ financial activities that are excluded are activities comparable with those listed - in particular, ones involving the lending of money or the bearing of the customer’s financial risk. The provision of services, such as advice on financial matters, is not covered by the exclusion.

Intermediary businesses within the financial sector, such as mortgage advisors or brokers and managing general agents in the insurance sector for example, form part of the value chain in respect of the provision of finance or insurance products. However, as these businesses typically do not bear financial risk (they do not provide the capital for lending or underwriting) the services they are providing would not fall within the exclusion so long as they are commercially and economically independent of those parties that do.

The regulatory status of financial services businesses in the UK will often indicate whether the company can or does bear financial risk. For example, a business regulated by the Prudential Regulation Authority (PRA) will be engaged in banking, insurance or other financial activity that would be excluded. A business regulated solely by the Financial Conduct Authority (FCA) should not have this capacity to put funds at risk. Where such businesses do hold client money this should only be as a conduit to the end provider; such as an investment advisor transferring client money into investments, or an insurance intermediary receiving insurance premiums to transfer to the insurer. We would accept that this temporary holding of client funds for such purposes is unlikely to involve putting the company’s capital at risk and would not constitute an excluded financial activity.