Are charity accounts safe?

troonguy

Hi Folks

We use a treasurer account with HBOS at present. Does the Government £50,000 protection cover such accounts as well?

thanks for any advice
simon

oldtoolie

Probably. This is what the Financial Services Compensation Scheme (FSCS) says:

Charities

If a bank or building society authorised by the FSA is unable to pay back deposits held with it, the FSCS can pay 100% of the first £50,000 of a claim, per person, per authorised institution. FSCS protects private individuals and some small businesses. Whether a charity is covered will depend on how it is constituted, i.e. whether it is a limited company, or an unincorporated association.
A limited company would be treated as having a claim, so would be protected in its own right up to the £50,000 limit, if it fell within the definition of a "small company" (please see below).
If the charity is an unincorporated association, it will be entitled to claim up to £50,000, unless it falls into the category of a "large mutual association" (see COMP 4.2.2(13)) - the test which applies is that it must have less than £1.4 million in net assets.
However, different rules apply for claims made under a general insurance contract. For those claims, a charity would be treated as having a claim, and would be protected in its own right, if it fell within the definition of a "small business". In this case a small business is defined as a partnership, body corporate, unincorporated association or mutual association which, under the COMP rules, has an annual turnover of less than £1m. For claims arising in relation to life insurance, there is generally no size criterion barring eligibility for compensation.

Who is protected?

FSCS was set up mainly to assist private individuals, although some smaller businesses are also covered. Larger businesses are generally excluded, although there are some exceptions to this (for example for claims in respect of certain compulsory insurances). Our rules tell us which claims are eligible and form part of the FSA's Handbook of rules and guidance, under Redress, Compensation.
As an indicative guide only, for the purposes of deposit and investment claims, smaller companies are protected. A smaller company must meet two of the following criteria (as set out in section 247 of the Companies Act 1985 or section 382 of the Companies Act 2006 as applicable):

• Turnover: not more than £6.5 million
• Balance sheet total: not more than £3.26 million
• Total number of employees: not more than 50

For claims made under an insurance contract, small businesses are protected. A small business under the COMP rules is one that has an annual turnover of less than £1m.
The same levels of compensation apply whether the claimant is a private individual, small business, or a small company.

www.fscs.org.uk/consumer/latest_news/

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