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Banking for charities and voluntary organisations

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Trustees have a legal duty to safeguard their charity’s money and assets. When receiving, holding and moving funds, trustees must take proper care to ensure the charity’s money is held safely and not placed at undue risk. Trustees are ultimately responsible for ensuring that the charity’s banking arrangements are suitable for the charity’s needs. This legal duty is outlined in the Charity Commission’s guidance on holding, moving and receiving funds safely.

When is a bank account required?

To fulfil their legal duty, trustees will need to ensure that their charity has a bank account. You will also need a bank account to register with HMRC and benefit from charity tax reliefs.

If you are setting up a charity, the point at which you can open a charity bank account can be confusing. You are not required to have a bank account when registering with the Charity Commission. However for all charity structures, the Charity Commission will require proof of at least £5,000 annual income, as part of the registration process. This does not include the Charitable Incorporated Organisation, which does not require proof of minimum income.

The Charity Commission accepts the following forms of proof::

  • Your latest published annual accounts (in PDF format). They must have been approved by an independent examiner or auditor
  • A formal offer of funding from a recognised funding body (as a scanned image)
  • A recent bank statement (scanned image)

Banks will need to confirm the existence of any organisation opening an account, so if you are not yet registered with the Charity Commission, you can consider providing:

  • a written constitution / governing document
  • if you have had bank accounts previously, you may be able to produce a recent bank statement
  • proof of existence from an alternative regulator such as the Financial Conduct Authority or Companies House

Types of bank accounts

Bank accounts generally fall into one of two categories:

  • Current (day-to-day banking)
  • Deposit (savings) accounts.

There are different types of current accounts available from banks, including:

  • Treasurer / Community / Club: usually free banking but services can be limited
  • Fixed fee accounts: fixed monthly fee but where additional charges might be incurred
  • Transaction-based tariffs: This might be where a charity pays a commercial or corporate banking tariff and pays for every transaction that is made

There are also a number of different deposit accounts for charities, including:

  • Instant access: usually paying a relatively low interest rate. These accounts are ideal for charities that may need immediate access to reserves or who have restricted or designated funds that they wish to set aside.
  • Notice accounts: these accounts are for charities that wish to put reserves aside for a short while, typically 1 – 6 months. These accounts do not have a fixed expiry date and will continue indefinitely. Withdrawals are made by giving notice to the bank and funds are then transferred after the required time period.
  • Fixed term deposits: these are accounts where reserves are deposited for a fixed time period at a fixed interest rate. At the end of that period, the reserves plus any interest accrued are repaid and the account is closed.
  • Deposit platforms: these are online services that provide a portal to a number of deposit accounts, from a variety of banks. These can be used to deposit reserves across the banks on that platform, but often without the need for additional paperwork. There may be a charge for this service.

Choosing a bank account

Working out your banking priorities

When choosing a bank account, you need to think about more than just the fees and rates of interest. Use the questions below to help you work out your banking priorities:

  • Does the bank understand the charity sector?
  • How will you want to interact with the bank? E.g. phone, in-person or online
  • Understand your banking requirements by thinking about:
    • How does money come in? Cash, cheques, electronic payments
    • How do you like to make payments?
    • Do you need access to cash?
    • Do you operate overseas?
    • Do you need company credit/debit cards?
    • Where are your signatories based? How many need to authorise payment?
    • What does your cash flow look like? Are there going to be times when you need to borrow money to tide you over or have spare money to invest?
    • How many accounts do you need?
  • Will you rely on a branch network to deposit or withdraw funds?
  • Are the charges cost-effective?
  • Does the bank align with your charity’s mission and values?
  • Does the bank provide other services that might be of benefit to your charity?

When you’ve worked out your priorities, create a scoresheet listing your most important criteria. You can then compare products.

Better Business Finance have opened a business bank account finder can help you understand the options that are available to your charity

The Charity Excellence Framework has a list of UK charity and community group bank accounts.

You can also ask other organisations for recommendations based on their experiences.

Considering online banking and other functionality

Depending on your banking priorities, online and mobile banking functionality might be an important consideration. Some questions you will need to ask:

  • How will the charity’s funds be protected? What are the risks as well as the opportunities?
  • Are there additional fees for this?
  • What are the restrictions in how this can be used?
  • Will two people be needed to make an online payment?

Find out more about how advances in technology can support your charity’s banking needs in HSBC’s modern banking guide for charities, voluntary organisations, faith and community groups.

If your charity is dealing with a lot of cash and cheques

Charities can find banking particularly difficult if they are dealing with a lot of cash and cheques.

If you are dealing with a lot of cash and cheques, a key consideration when choosing a bank account is the accessibility of branches. It is worth checking the following:

  • Are there a number of branches, of the same bank, within easy travelling distance?
  • What are their opening hours?
  • Are you able to deposit cash outside normal office hours?
  • Will you need to give advance notice when withdrawing large amounts of coins?
  • Can you deposit and withdraw cash via the Post Office if no bank branch is available?

It is worth noting that some banks now allow you the option to deposit cheques virtually (via an app) without the need to travel to branches or post offices.

If your charity is working internationally

If you charity is working internationally, there are extra considerations when choosing a bank account :

  • Does the bank have experience in transferring funds to the country in which the charity operates?
  • How does the bank accept requests for overseas payments?
  • What additional information might that bank require?

You also need to make sure that you have done what you can to protect your charity’s funds. You should consider:

  • Do you have internal policies and procedures in place to protect the charity’s funds and prevent aid diversion?
  • What internal monitoring is in place to ensure that funds transferred overseas are spent in line with donors’ wishes or your charity’s objectives?
  • If receiving money from overseas, what information needs to be provided to your donor to ensure funds are received without delay (eg IBAN, SWIFT code etc)? Does your bank need advanced notification?
  • If a transaction is unusual, might the bank need to contact the charity before the transaction can be credited to the account?

The Charity Commission has guidance for charities to consider if they are sending funds overseas.

Our guidance on internal controls can help you think about what you need to have in place

Setting up your bank account

You need to allow plenty of time to set up a bank account. Banks have regulations that they have to abide by, and a process is there to ensure that these are followed.

Your bank account must be in the name of your organisation as per your governing document.

Before setting up your bank account, you should:

  • Locate and read through the application process on the bank’s website
  • Have a clear understanding of your banking priorities
  • Have all the information and documentation about your organisation ready, that you might be required to provide. This is likely to include: your governing document, information about your organisation’s purpose, how it is funded, where money will be sent to and from, who its beneficiaries are.

The information that is required

Banks and other financial institutions are required to meet certain ‘Know Your Customer’ regulations and so need to ensure they understand who their customers are and what those customers do.

Whilst this list is not exhaustive, and can vary from bank to bank, information requested might include:

  • General information on the organisation e.g. name, address, any registration number (Companies House, Charity Commission) expected levels of income and types of transactions to be undertaken
  • This will need to be verified and so, if it is not in the public domain (e.g. Charity Commission) further documentation may be required
  • They will also ask for the full name, home address, date of birth and telephone number for some or all people who manage or oversee the organisation (e.g. trustees and other signatories)
  • Some banks may also ask for ID such as passport and driving licence to confirm these details
  • For organisations that are transferring their accounts from another bank, copies of up to six months’ bank statements may be requested
  • For new organisations, a bank might ask for details on the source of initial funding.

Practical considerations when you have a bank account

Changing signatories

It is a good idea to have 3-5 signatories, so that any two can sign. You need to balance the need for proper oversight and control with the availability of senior people and trustees.

When changing signatories much of the information required will be similar to what was required when the account was opened. It is worth checking if further ID is required. It can take time for the bank to update any changes so allow time for this to happen.

Informing the bank of any changes

You should proactively inform the bank of any changes in your organisation. Changes requiring proactive contact with the bank typically include updating of signing authority and change of address or contact details.

You should inform the bank of these, as soon as possible. If possible, inform your bank that changes will occur at a certain date in the future so that they have plenty of time to update their records.

Spreading the risk and the Financial Services Compensation Scheme (FSCS)

If you have a lot of money, you are expected to think about spreading the risk between banks, in case your bank fails.

The FSCS where eligible offers protection for up to £85,000 of money held with a UK-regulated bank or building society, which means that if a bank goes under, you will potentially be covered up to that amount.

The things to watch out for are that it applies:

  • per organisation (not per account), and
  • per ‘banking licence’ - some banks like Bank of Scotland and Halifax operate under one licence, so amounts in each of these would only be covered once

Find out more from FSCS online. If you are not clear if you are eligible for protection, you should seek professional advice

Other resources

CFG’s guide on banking for small charities (available to CFG members)

Use Bank Green to find the best eco-bank

This guidance was produced with the support of Ben Jowitt from the Charities Aid Foundation.

Last reviewed: 07 November 2022

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This page was last reviewed for accuracy on 07 November 2022

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