Why Starling Business was a big disappointment

I have been a client of Starling since 2017. I had a personal account and a Business account.
The business account was for my consulting business as I am a DevSecOps contractor.

Not too long ago I opened my second business in order to invest the profits of my consulting business. This was heavily based on Foxy Monkey’s post on how to invest your company’s profits. Full article here: https://www.foxymonkey.com/how-to-invest-your-company-profits/

But Starling refused to provide me with a bank account, even though it didn’t infringe any of their Terms and Conditions (which is not long and I read all).

I also tried to open a beta business account with @Monzo for this business, but they told me that this is not the company they want to trial the business account at the moment. Which I understand given the fact that it’s still in beta and they’re seeking specific types of companies for the moment. Hopefully once they release it to the public, Monzo will take my business in because it is as good as any other.

But it was very frustrating to have Starling deny my account application. Don’t take me wrong, I am 100% in favour of private business choosing their clients and who they want to work with. But the same way that Starling doesn’t want one of my business, they’re not getting any of them. Which led me to close all my accounts with them this week.

Currently my 2 business have accounts with Tide, Coconut and Revolut. Why not? No problem whatsoever setting it up with them. Don’t really understand why Starling made such a big fuss out of it.

If you want to know more about the business, I summed it here:

In short, profits from my consulting business were accumulating and not providing any interest. In fact, they were devaluating due to inflation. My £10,000 will be worth £7,500 in 10 years’ time. So, doing nothing was really not an option! Similarly, £100,000 will be worth £75,000. A £25,000 loss!

I looked into investing the profits of the company, if I invested with my main company, I could lose some of my company benefits. In short, the downside of investing with the same company are:

  • Lose grant for Research and Development.
  • Lose VAT Flat Rate Scheme.
  • Lose Entrepreneurs Relief.
  • Being pulled to a higher tax scheme if HMRC considers it a CIC (Closed Investment Company).

To take the money out I would have to pay 32.5% dividend tax upfront. Which is definitely not ideal. With a second business I could borrow money from my first business and invest the profits and still keep the consulting company with the same benefits, without withdrawing the money as dividend nor salary.

I consulted an accountant, setup the business, setup the loan contract with 5% interest between the businesses, which is low enough to keep my consulting company on the same status.

With my investing company I’m free to create “corporate accounts” with platforms such as PropertyPartner, Crowdcube, RateSetter, eToro and WiseAlpha (for now).

Using this setup, I pay taxes only when I liquidate investments, and I only pay on profits. The rest of the money must be payed back in 7 years (extensible by contract).

UK SIC Code (Standard industrial classification of economic activities): 64991 - Security dealing on own account List of activities classified inside the UK SIC Code 64991:

• Bill broker on own account (other than discount house)
• Share dealer on own account
• Securities dealer on own account
• Inter-dealer brokers
• Financial futures, options and other derivatives dealing in on own account • Dealer in stocks and shares on own account
• Commodities dealing for investment purposes
• Bullion dealer in investment grades
• Bullion broker on own account
• Stock exchange money broker activities

New SIC codes could always be added to the company at any time to cover new types of investments. For example:

68100 – Buying and selling of own real estate

USA Regulation FATCA, might have considered my company, based on the decision tree in the document from the link:

My investment business would be considered to be a company of type: Passive NFFE (Passive Non-Financial Foreign Entity). And this is important to invest in the NY Stock Market.

Therefore the source of funds of my investing business, are loans from the consulting business - the main business where I receive invoice payments for contracting in Cloud Infrastructure and Cyber Security.

The consulting business:

  • Also belong solely to me.
  • It’s where my invoices are paid to.
  • It’s very profitable (as it doesn’t require much to run and I don’t take much out of it for me).
  • It lends its profits to my investment business in order to invest it.

Hence, a legitimate business with no reason to have its bank account denied by Starling, or any other bank for that matter.

What do you think? Leave your thoughts.

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What do I think? I think that you are not alone in being denied a bank account for what seems to you to be unfair reasons.

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