The time it takes to open a bank account in the UK should not be underestimated – it is often the most complex area of setting up a UK company as an overseas investor. Selecting the right bank is crucial to the smooth functioning of your newly established UK company. The first step should be to thoroughly research and choose a bank that has experience in dealing with foreign shareholders. It is essential to investigate the account features, transaction fees, and the bank’s reputation for international banking services.
When considering options for opening a corporate bank account in the UK, businesses have several choices, including:
- Brick-and-Mortar Banks: also known as high street banks, these are traditional banks with physical branches where customers can conduct face-to-face transactions and seek personalised assistance. These banks offer a wide physical branch network, allowing for in-person support and accessibility. Although these banks are usually more reputable, they often have lengthy processing times and potentially higher fees. Besides, these banks typically have a more conservative risk appetite and may be more likely to reject those with complex shareholding structures involving non-resident entities and individuals.
- Online Banks: Online banks operate exclusively through the internet and mobile apps, without any physical branches. They are known for their streamlined processes, cost-effective fee structures, and user-friendly interfaces. Online banks may offer more lenient terms and a greater willingness to work with overseas individuals setting up in the UK. They may however have some restrictions on depositing, withdrawing, and transferring money compared to brick-and-mortar banks.
- FinTech providers and online payment platforms: FinTech providers often operate as e-money institutions and they do not hold banking licences issued by the Financial Conduct Authority (FCA), so may come with associated reliability risks. While these FinTech solutions may not provide a complete banking solution, they serve as powerful tools for international businesses looking to expedite their entry into the UK market. They also assist with meeting compliance requirements with HMRC and facilitate the smooth processing of payments and receipts.
- UK Branches of Overseas Banks: These offer specialised services for clients from specific countries, making it easier for businesses with shareholders from that country to open a bank account in the UK. They typically hold a banking licence from the FCA. These often have bilingual staff, experience in international transactions, and a better understanding of the regulatory requirements for clients from the respective countries. Where cross-border transactions are required for your company’s operations, UK branches of overseas banks may be the most suitable solution. On the other hand, they may impose higher fees and financial requirements for account opening such as a commitment to achieve a specific revenue threshold within one year, and/or require a minimum higher deposit in the account.
Important considerations and recommendations:
- It could take up to three months to open a bank account in the UK. Therefore, we advise that businesses consider applying for multiple types of bank accounts concurrently to enhance their chances of successful account opening.
- Before initiating the bank account opening process, it is vital to ensure that your UK company is properly registered with the relevant authorities such as Companies House and HMRC.
- UK banks place significant emphasis on compliance with anti-money laundering (AML) regulations and Know Your Customer (KYC) procedures. They must undertake customer due diligence before setting up a bank account for their new customers. Therefore, detailed information about all key foreign shareholders (usually owning more than 10%), including personal identification documents like passport copies, two forms of proof of address, and the source of their funds for the capital, will be required. These will need to be translated into English.
- Most banks require the company to have at least one director who is a UK resident since it provides a local point of contact and enhances the bank’s ability to conduct due diligence on the company. The bank may also request the local director physically attend the bank for an in-person meeting for KYC checks. Some banks also require the PSC to be a UK resident as well. Appointing a UK resident company secretary could also potentially expedite the account opening process.
- During the account opening process, banks will require a comprehensive business plan that outlines your company’s activities, projected financials, and future growth prospects. They may also ask for licences or agreements relevant to your business operations.
- To be eligible for a sponsorship licence to employ foreign employees, the company should have a corporate bank account in the UK with a bank registered by FCA and PRA. While some businesses may consider using bank accounts from FinTech providers or digital banks for convenience, these institutions may not meet the strict criteria set by the UK Home Office for sponsorship licence applications.
If you are looking to set up a UK presence, please get in touch.
Tom Redfern email: tredfern@redfernlegal.com
