Can anyone explain - bank insist on two separate business accounts.

OuterNet

Could anyone help me understand this recent bit issue I came across when trying to open a bank account with HSBC?

I am a freelance sole trader, and for the first few months was using my personal bank account to receive money from customers. Now things have started to get more regular, and my accountant advised me to set up a separate bank account for the business to make everything clear and separate when it comes to HMRC and accounting.

I approached HSBC, but they say that their rules say I will have to set up two business accounts, because the activities I am carrying out: Research and Management are 'classed as two separate businesses'.

I am not keen to do this, as it seems like an overly complicated set up for a very small (under 30,000 turnover) business, and my objective was to simplify things.

Before I was self employed, I worked for two different Ltd companies that carried out similar activities to those I am now doing as a self employed person, and they both only had one account.

But I am keen to understand the rule, the person I spoke to on the phone just said 'those are our rules'. Can anyone shed light on why these activities would necessitate separate accounts, and whether other banks will be likely to have the same requirement?

InsideInsurance

And presumably they want to charge a fee for each of them?

Personally, just give them one activity, open one account and use it. Legally as a sole trader there is only one legal entity and that is you, there is no actual "businesses" at all. Anything about needing different accounts would be a purely business decision from them.

I know when I was a sole trader doing web development and running some of my own sites generating advertising revenue and both went into the same HSBC account

OuterNet

Thanks Inside Insurance for sharing your experience, maybe i'll need to stick to one business description to avoid confusion.

JimmyTheWig

I agree with InsideInsurance.
As you have already seen, you don't need _any_ business accounts - you can just run it from a personal current account if you want.
But if it makes things easier for you to have a business account then get one.

If HMRC say that you have two seperate businesses then you have two seperate businesses. It is up to you whether tou run them both from a personal current account, both from the same business account or from different business accounts. As long as you can clarify what is going in for each business that is fine.

CKhalvashi

JimmyTheWig wrote: »

If HMRC say that you have two seperate businesses then you have two seperate businesses. It is up to you whether tou run them both from a personal current account, both from the same business account or from different business accounts. As long as you can clarify what is going in for each business that is fine.

The main thing is that it can be justified, however as a Sole Trader, there is only one box on a tax return for total self-employed income.

It's only when running a Limited companies, that this becomes a problem, for example, we have XYZ Taxis and Private Hire Limited (runs the office), and we also have XYZ Car Hire Limited (owns the cars), both of which are owned by XYZ Transport Holdings Limited, which are 3 companies, 3 bank accounts, but only 1 VAT registration.

CK

Mistral001

Remember HMRC will be interested in ALL accounts, business and personal and not just the business account.

JimmyTheWig

CKhalvashi wrote: »

The main thing is that it can be justified, however as a Sole Trader, there is only one box on a tax return for total self-employed income.

Is that true?
I'm sure that one year when my wife had two self-employment businesses we had to fill out a self-employment section for each of them.

Obviously things may have changed since then. (Or we might have done it wrong!)

pooch

JimmyTheWig wrote: »

Is that true?
I'm sure that one year when my wife had two self-employment businesses we had to fill out a self-employment section for each of them.

Obviously things may have changed since then. (Or we might have done it wrong!)

I think you probably got it right

I just looked the the 2011 tax return (the last paper copy I got) and it definitely says "Fill in a separate Self-employment page for each business and say how many sets of pages you are completing"

I very much doubt it has changed since, but I don't know for sure. I'm not self employed.

pooch

InsideInsurance wrote: »

And presumably they want to charge a fee for each of them?

Personally, just give them one activity, open one account and use it. Legally as a sole trader there is only one legal entity and that is you, there is no actual "businesses" at all. Anything about needing different accounts would be a purely business decision from them.

I know when I was a sole trader doing web development and running some of my own sites generating advertising revenue and both went into the same HSBC account

Presumably they will both be free for the couple of years (or whatever their free banking period is), else I can't see why the OP is even considering using the fee charging bank - other free alternatives have been discussed on this site, this board even.

I suggest let HSBC open both accounts if that's what they want to do, but only give details of one of the business accounts to anyone - put all the business transactions through just one of the accounts - the bank will be none the wiser.

Just before the free banking period ends and you are looking to move to a cheaper banking solution (or even if you are don't) cancel the one business account you never used.

Ballymackeonan

Or keep one as a working account, and the other as a business reserve (to give it a fancy name!) where you transfer any spare cash to meet things like the dreaded tax bills or equipment purchases!

InsideInsurance

pooch wrote: »

I think you probably got it right

Certainly with the online form it is optional if you enter them separately or roll them into one.

The OP however doesnt have two businesses, he is a sole trader that happens to provide more than one type of services to his clients. Legally there is only him as he is a sole trader and so purely his decision how many bank accounts he has, subject to the banks T&Cs, but HMRC can ask to look at all of them because they are all "his"