Monzo Business: Active vs Passive Non-Financial Entities (NFEs)

Hi all :wave:

So I never would have expected this as recently as the beginning of this year, but I very likely need a business account now

I have set up a limited company to manage the freehold for the block of the converted flats in which I live that I am in the process of purchasing

If it helps, the Nature of business (SIC) is 98000 - Residents property management

This business would exist to collect together money from the several leaseholders to pay for maintenance, building insurance and other upkeep. It could in theory generate a profit, but that is not really the aim of the game

I decided to take a look at the Monzo Business account, partly out of interest and partly out of convenience

All went fine up to the question about whether it is an Active or Passive Non-Financial Entity (NFE):

Well Monzo Business does not support a Passive NFE apparently:

But I cannot just really work around that by selecting Active NFE unless I really am covered

Anyone able to offer any experience or advice?

Thanks!

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Well, in this case you clearly need to look at Starling Business account and/or Revolut Business T&Cs :credit_card::scroll::eyes:

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I think I will be giving Revolut a pass in any case! This is defo a case where I want an actual bank, rather than a throwaway card that I sometimes used to top up my National Lottery account

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I don’t fully understand your business. Outside my area.

With that said, would you not fall under the new business clause and thus be classified as active?

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I know you’ll think I’m saying this because I want to say something against Monzo, but that’s not why.

My thinking is that I wouldn’t risk using a business account from a bank where I’m not sure I’m eligible for it. Where I need to “massage the numbers” (or definitions in this case). Particularly not if there are ongoing reports of that bank closing accounts without hesitation, and if there’s plenty of competition available.

At the moment, if I ran a business where there is even the slightest hint of a doubt whether I’d fit the eligibility criteria, I’d stay very well clear.

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Surely your company is an active NFE, right?

It’s a not-for-profit organisation as far as I understand it. The idea being you and other tenants/owners pool in money, and the sole usage of that money is to pay for insurance, upkeep, repairs etc. The purpose isn’t to sell a product, make money and have the shareholders profit, therefore as far as I understand it, its a not-for-profit.

N.B I didn’t setup or manage the company myself, but up until very recently (I’ve just this last month moved home), I was part of a RTM (right to manage) company for the flats I was in, that was also registered with SIC 98000 too, and have some understanding of the type of company.

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I read it as OP buying it himself, not as a group.

I wish the management company of our building didn’t try and make a profit!

I don’t know the differences, but will you be adding a fee that doesn’t get pooled into the pot?

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Only because no one else was interested at this cost at this point as/and I was the only one with a shorter lease (the couple who had just renewed their lease last year I can understand being a bit exasperated by the timing!)

I have created the company with the same number of shares as flats in the building - though I own all of them right now - with the hope/expectation of persuading others in one by one in time

In practice yes, legally no

It would be possible to make a smallish profit by attracting things like kick-backs on insurance and maintenance, which is how most third party freeholders extract money, but given I am one of the folk paying as well I shall be looking to minimise overall costs for the benefit of everyone

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Not sure that is legal, but no anyway

As previous comment, I could look to get my own money off the back of things they/I are legit paying for, but I could not ask for a fee

There is the chance to ask for a per-year management fee to cover admin costs, and I expect that again gets a bit inflated to higher end of the scale, but it is not mystery money

My current freeholder is not perfect, but about to do it myself I see that I could have done a lot worse

I sympathise with that, and maybe I won’t go with Monzo for my own reasons - for one, as above I am looking to not be the only director in time, so another bank totally separate from mine might be sensible - but there is always a chance that said bank will also ask this question and again I will not know the answer

Not thinking that at all. Your comments are appreciated

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Which sounds a bit close to the bit in the Active NFE definition!

I will stop commenting after this one, to give the topic a break, but I have done searches of Google for the various terms here, including Starling Bank and there are scant to no results! Ideal…

The closest match, not actually that close, was actually on this forum for someone grumbling about Starling Bank not allowing their overly exotic investment company to open an account :roll_eyes:

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One last one!

A bit like those 10% off for new customers deals, I won’t be new next year (or rather year after next in this case), so I’ll likely still need to know the answer

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Ask in app chat :eyes:

It is legal. You add your management fee. Whether you choose that to be £10 or £1000 per flat is up to you.

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Not sure we are disagreeing on that point:

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I am going to try to have a chat to someone from the business banking team, but probably best left until not a Sunday

Just to demonstrate this this is not unique to Monzo, there is at least one other UK business bank I can find asking the same question:

Active and passive income is accounting terminology used to describe how your business generates its income. We ask this because we need to know if 50% or more of your income comes from providing a service or trading.

Active businesses typically generate 50% or more of your income from trading or providing a service or trade and that you’re actively participating in. Active businesses may include manufacturing, buying and selling products. Some typical examples of active businesses are consulting, manufacturing, accountancy services, farming, retailing.

Passive businesses generally earn more than 50% of your income from passive sources such as rent or from assets that produce passive income like interest or dividends from shares. Examples of this would be investment management, rental income, royalties, landlords.

Could not find any mentions on Tide website (Edit: been through the Starling website and PDF of Ts&Cs as well now)

That definitely makes this sound more like Active than Passive, but lack of an explicit statement is what I am a bit hung up on

I have been able to be completely confident and comprehensive about every other question from my solicitor, Companies House and Monzo up to that very last question at the latter!

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This is one of those - very few - cases where I’d book a couple of appointments with business banking specialists in local branches and see what they say.

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I may - very reluctantly - end up doing so, and not for just pandemic reasons, if I cannot get a definitive answer about this and any other point I came up with

I like the idea of a pot for each flat though! :joy:

I only just created it, my first and possibly only company, at four this morning so my solicitor has no excuses for delays, so I am cramming in information at a real rate of knots

I have never even had to do self-assessment tax before…

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You don’t meet the requirements for a Monzo account, which state “And we don’t allow people to use Monzo Business as a client trust account”

You are pretty brave taking all this on! Do you not have an accountant to help you, the accounting rules are pretty complex

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