FSCS protection of LTD's cash reserve

[throwaway20200329]

My ltd has a small chunk of money in a business current account with a bank that is regulated by the Financial Conduct Authority. Given that the amount belongs to a ltd, is this amount afforded protection under the FSCS, please?

If so, and the quantity is over 85K, would it be sensible to simply open an account with a separate financial institution and split the amount?

[Countdown]

Yes and yes

[JulianPH]

Countdown said:

Yes and yes

^^^ Enough said!

[PurpleFox]

I was thinking the same two weeks ago. I didn't want to have another business account with associated monthly fees. I opened a Kent reliance business savings account, seem to be no fees and it was quick and easy to open.

I still have over £85k in the business current account though. Does anyone know, if I transferred this to a spare personal account (currently £1 balance) to protect the money would I fall foul of borrowing money as a director? It would just stay in this account which has been sitting dormant for a few years until the business needs it.

Thanks

[Joscal]

PurpleFox said:

I was thinking the same two weeks ago. I didn't want to have another business account with associated monthly fees. I opened a Kent reliance business savings account, seem to be no fees and it was quick and easy to open.

I still have over £85k in the business current account though. Does anyone know, if I transferred this to a spare personal account (currently £1 balance) to protect the money would I fall foul of borrowing money as a director? It would just stay in this account which has been sitting dormant for a few years until the business needs it.

Thanks

Interested to know the answer on transferring to a personal account also. Scary times..

Edited to add I've just emailed my accountant and will update.

Edited by Joscal on Monday 30th March 08:09

[Mgd_uk]

We have opened a Monzo Business account for the same purposes. A Lite plan is available and no monthly fees, but for us the £5 for access to bank feeds etc make it worth while.

[bigandclever]

PurpleFox said:

I was thinking the same two weeks ago. I didn't want to have another business account with associated monthly fees. I opened a Kent reliance business savings account, seem to be no fees and it was quick and easy to open.

I still have over £85k in the business current account though. Does anyone know, if I transferred this to a spare personal account (currently £1 balance) to protect the money would I fall foul of borrowing money as a director? It would just stay in this account which has been sitting dormant for a few years until the business needs it.

Thanks

If it’s going to be for a few years why not spend 15 minutes opening another business account elsewhere?

[JapanRed]

Just open a couple of business savings accounts with aldermore and virgin. They offer reasonable fixed and instant access rates and then you don’t need to take the risk by transferring into a personal account.

[Sheepshanks]

I might live to regret asking, but do people really fret about this? I’ve always thought that if banks starting going bust then all bets are off.

[SS2.]

Sheepshanks said:

I might live to regret asking, but do people really fret about this? I’ve always thought that if banks starting going bust then all bets are off.

I wouldn't say 'fret', but we are sailing unchartered waters currently and who knows what could happen.

I've recently been through the process of shifting cash from a single company account to a number of new & existing accounts to ensure maximum FSCS protection.

The chances of our bank going pop may be vanishingly small but, with the minimal amount of effort required to achieve best protection, I wasn't prepared to sit on my hands and take that risk.

[PurpleFox]

bigandclever said:

If it’s going to be for a few years why not spend 15 minutes opening another business account elsewhere?

I just wanted to avoid having another account which would only be needed in the short term. I had a site lined up ready to purchase, thankfully we decided to wait for the outcome of a planning application before exchange. Planning due to be determined tomorrow and in the 8 weeks or so since we submitted a lot has changed!

It would seem sensible to hang on and see how things pan out so yes, I may look to open another account. I will look into Aldermore and Virgin as suggested.

[dalenorth]

I’ve been told it’s 85k per banking group so be careful you don’t use the same banking group twice.

[SS2.]

If the company is a separate legal entity (ie ACME Anvils Ltd) and you have a personal account within the same banking group, each will be covered for up to £85k.

[Chris Type R]

dalenorth said:

I’ve been told it’s 85k per banking group so be careful you don’t use the same banking group twice.

I was looking in to this a few days ago as well and at the time found a list of which banks share licences - unfortunately can't find it again.

EDIT - found a different site - https://www.lovemoney.com/guides/1903/financial-se...

[Chris Type R]

SS2. said:

If the company is a separate legal entity (ie ACME Anvils Ltd) and you have a personal account within the same banking group, each will be covered for up to £85k.

Also, if the personal account is a joint account I believe the protection is £170k.

[SS2.]

Chris Type R said:

SS2. said:

If the company is a separate legal entity (ie ACME Anvils Ltd) and you have a personal account within the same banking group, each will be covered for up to £85k.

Also, if the personal account is a joint account I believe the protection is £170k.

Quite so.

[JapanRed]

Sheepshanks said:

I might live to regret asking, but do people really fret about this? I’ve always thought that if banks starting going bust then all bets are off.

I don’t fret at all. I’m only 35 and in my adult lifetime I’ve seen massive international banks fail. For sake of 10 mins opening an account online I keep a maximum of £85k with each institution and sleep that bit easier at night.

[JapanRed]

dalenorth said:

I’ve been told it’s 85k per banking group so be careful you don’t use the same banking group twice.

You are correct. MSE website lists all the banking groups and their subsidiaries.

[williaa68]

If you want to be particularly prudent you may want to keep a little less. Eg a 1 year bond at 1.5% keep 83500.

[anonymous-user]

Sheepshanks said:

I might live to regret asking, but do people really fret about this? I’ve always thought that if banks starting going bust then all bets are off.

I strongly recommend the FSCS government guarantee be kept firmly in mind. The collapse of Icelandic banks a decade ago is not easily forgotten by those of us who had cash in, for instance, Icesave. Iceland walked away leaving the UK government to bail out the UK operations of Icelandic banks in accordance with the FSCS guarantee.

Remember this - the guarantee only protects your capital and it takes several months before you get to see your money again. In other words, you don't have access to your cash for quite some time and you don't earn any interest in the period between a bank's collapse and the UK government reimbursing your money.

Solution? Use more than one bank, always try to choose reliable banks and never exceed the FSCS guarantee limit.