Bank accounts for community voluntary group

br1anst0rm

I've searched the forum and there are numerous posts on this subject.  But many of them are old, and offer recommendations or links to providers and products that are no longer available.  So I'm asking questions in a new thread.

My wife is chair of a small local voluntary community group which looks after gardens, flowerbeds and other public planting around town.  The group is not a registered charity.  It conducts no business or trading.  It has no paid staff.  Its income (well below the £10k threshold mentioned in some bank websites) consists largely of donations and the occasional small grant.  Its expenditure is essentially on tools, plants and other practical necessities.  The group needs to receive and bank cash and cheques, and to pay out cash and write cheques for purchases.

Following the closure of the local branch of TSB (with whom the group had a 'clubs and societies' account) and all but one other local bank branches, the group is now trying to shift its account to the only bank which still has a local presence, the Bank of Scotland (part of the Lloyds Banking Group).  Unfortunately it turns out that its local branch cannot deal with clubs, societies or other similar organisations:  all contact has to be with a business-banking department somewhere else, online or by phone.

The procedure and form-filling is proving astonishingly complex, often confusing, and sometimes apparently irrelevant.  The service on offer seems to be a Treasurer's Account.  It is not obvious that this is appropriate for a local voluntary community group.  In particular the bank is asking for completion of forms and certifications which it says HMRC requires on tax status and residency... "because the bank has operations in the US".  This seems frankly bizarre.

So the first question is:  are there alternative providers of banking facilities which offer a straightforward fee-free service to community, voluntary, not-for-profit, non-trading groups and organisations without the elaborate rigmarole of tax-certification etc?

A second - related - question.  Do any providers of banking services to such community groups offer an interest-paying "savings/deposit" account?  This further question has arisen because the group has recently received an unusually large one-off donation.  Sensibly, they would like to keep these funds partly as a contingency reserve (in case they take on a major local project) and also to use the money as a source of income - ie retaining the capital and using interest to supplement their normal very modest donation/grant income.

The Co-op Bank apparently used to offer a Community DirectPlus account which paid interest on credit balances.  But there is no reference to this now on the bank's website. Do any other banks offer interest-paying accounts to such groups?

Where else might the group consider depositing this 'windfall' donation to earn a a bit of interest without being treated as a business and immediately becoming liable for tax with all the additional administration which that seems likely to entail?

gt94sss2

br1anst0rm said:

So the first question is:  are there alternative providers of banking facilities which offer a straightforward fee-free service to community, voluntary, not-for-profit, non-trading groups and organisations without the elaborate rigmarole of tax-certification etc?

If they are happy with TSB, have they considered keeping their current account and using the Post Office for transactions?

The Co-op Bank apparently used to offer a Community DirectPlus account which paid interest on credit balances.  But there is no reference to this now on the bank's website.

https://www.co-operativebank.co.uk/business/products/current-accounts/community-directplus/

br1anst0rm

Thanks @gt94sss2 , for that response and link.

On the first question, TSB service wasn't great after the local branch closed.  But I suppose the group does have an option to revert to them - and the Post Office - if other providers raise too many hurdles to opening a new account.

As for the Co-op, I've looked at the details (thanks for the link).  It is not clear whether this group would be eligible:

"Your organisation must be one of the following:

• Registered charity (exempted charities must provide a letter of authority with their application)
• Co-operative or community benefit society (if applicable, confirmation of registration with Co-operatives UK and community benefits society act required)
• Credit union (evidence of FCA regulated status required)
• Community interest company (must be registered at Companies House)".

The group isn't registered under any of these headings .... and doesn't seem to qualify as any of those types of organisation.

Also I can't see a reference anywhere to the payment of interest - either on current account credit or on a linked deposit account.  The group is still looking for a simple way of earning some interest (ideally tax-free - the income would prpbably be less than £100 pa) on their recent lump-sum windfall donation.  National Savings?

etienneg

As someone who has been associated with several small (in my case, charity) groups over the years, I sympathise with your position. However, things are very different these days and I think it will help you to understand this.

The regulatory framework around banking is now much more complicated than it was in times past. This is largely to do with money laundering and the consequent know your customer (KYC) requirements. The amount of work involved in running bank accounts for small groups, often with low turnover, is consequently high, meaning they are troublesome and costly accounts for the banks. Hence, several banks have pulled out of providing these. For those that remain, you will find much more hassle, particularly when trying to open an account.

I know you tell us you are a small community group. Whilst I'm not questioning this, nobody knows objectively that this is so. Think of it from the bank's point of view: if you wanted to launder money, an account for a "community group" would be ideal!

Consequently, I suggest you update your ideas on this. Forget ease of administration. Forget current account interest. Stick with what you already have if you possibly can, even if this means changing the way you do things (e.g. using the Post Office). If the bank writes to you asking for information, perhaps about signatories (even if it seems intrusive), don't ignore or fight it - politely provide the information requested.

HMRC will be involved with any account your group has that earns interest, unless it's a tax-free account.

br1anst0rm

Interesting and pragmatic response, @etienneg .

I understand where you - and the banks - are coming from.  I'm very aware of how far money laundering precautions and the KYC requirements have significantly changed the banking landscape in recent years.

I also realise that banks don't want to be bothered with administering small, low-turnover accounts, though I think that is regrettable. The retail world manages to include giant superstores and corner shops.  There are garages which serve and service a wide range of motorists from those who drive million-pound gas-guzzlers to impecunious students with battered old Minis.  Why can't the banking sector similarly provide services for a full range of clients from mega-billion corporations to small voluntary groups or individuals with more modest needs?

That of course is a broader philosophical and economic argument, to which there is probably no definitive answer.  But it does seem excessive to have a one-size-fits all approach to applying the money-laundering and registration rigmaroles when setting up or opening accounts.  It's a question of proportionality:  matching the intensity and complexity of control to the probability of abuse and the level of risk.

Yes, a community group could be used as a vehicle for money laundering or tax evasion.  But that argument isn't persuasive.  It's not a reason for not offering an account.  Banks already monitor the patterns of account transactions.  They could easily spot a situation, sound an alarm and investigate where a small account holder with an annual turnover of under £1000, whose normal activity is a handful of payments in and out each month, each less than - say - £100, begins to process dozens of transactions a month each of several hundred thousand pounds.

We're still left with one unanswered question:  how can a community group generate interest on a lump-sum donation?  Is there any straightforward way of doing so without having to fulfil onerous tax-related administrative requirements for the sake of a few dozen pounds a year?  Proportionality again.

xylophone

https://www.lloydsbank.com/business/industry-expertise/charities-and-not-for-profits.html?WT.ac=lloyds-bb_and_sme-business_accounts-treasurer-tile-FOM-charities_and_nfp_hub

HobgoblinBT

etienneg is spot on in my view as a retired commercial and corporate banker.   

If you were in business how much time would you devote to dealing with stuff that looses you money compared to work that pays your wages? (I would not have used these words whilst still employed). 

For your club to earn interest in a club account, ask your existing bankers if they can open an interest bearing business savings account to run alongside your existing current account. 

 

If you decide to open an account at another provider be prepared for a lot of work and to provide a lot of information to satisfy their up to date due diligence requirements.

br1anst0rm

Thanks again for those latest contributions to the thread.  

The discussion seems to have confirmed my sense that banks (with HMRC peering over their shoulder and government legislation setting the framework) are neither motivated nor able to take what I'd call a flexible or proportionate approach.  

And I get @HobgoblinBT 's point about banks not wanting to do stuff that loses them money (or doesn't generate significant profit).  Funny how energy companies are nevertheless able to offer 'social tariffs', and even mobile phone networks have special deals for those on low incomes.  But banks?  Not so likely....

I have however picked up from @xylophone 's link that the Lloyds Group - which includes Bank of Scotland - does appear to offer interest-paying "business savings" deposit and notice accounts.  So we'll see if our particular local community group, if and when it is able to open an account, is eligible for them and will then perhaps have to pay tax on the tiny amount of interest paid.  One small glimmer of hope as to the way forward.

gt94sss2

br1anst0rm said:

The discussion seems to have confirmed my sense that banks (with HMRC peering over their shoulder and government legislation setting the framework) are neither motivated nor able to take what I'd call a flexible or proportionate approach.  

And I get @HobgoblinBT 's point about banks not wanting to do stuff that loses them money (or doesn't generate significant profit).  Funny how energy companies are nevertheless able to offer 'social tariffs', and even mobile phone networks have special deals for those on low incomes.  But banks?  Not so likely....

To be fair to banks:

1. Banks will no doubt be concerned about the scale of the penalties if they are found to facilitate things like money laundering or tax evasion (including my US authorities)

2. Banks do offer Basic Bank accounts for customers which are similar in concept to social tariffs.

3. In a previous post, you mention the retail world manages to include giant superstores and corner shops providing customers a choice. Yes, that exists but at a price. However, you are obviously looking for a fee free account rather than one with a monthly fees..

As for the Lloyds link, here is the BoS version

https://business.bankofscotland.co.uk/industry-specialists/charities-and-not-for-profits.html

One final point: if all the other banks have closed their local branches, you may want to consider how long the local Bank of Scotland branch will actually exist for. 

You may want to check if building societies offer something suitable especially for savings

penners324

Why do you need a branch? Cash can be deposited at post offices and cheques in the app

Eco_Miser

Virgin Money do a clubs and societies account. I've no idea how hard  it is to open now, mine was opened when it was Yorkshire Bank. They also do various business savings accounts, that you may or may not be eligible for.

https://uk.virginmoney.com/business/charities-clubs-and-societies/clubs-and-societies-account/