The Government has recently raised the guarantee on deposits to £50,000 (from £35,000), but what does this mean for a business with substantial cash balances?

The Financial Services Compensation Scheme (FSCS) is designed to apply to individuals, so its effect regarding business deposits is limited.

The FSCS protects the deposits of small companies, which are those which meet two of three criteria:
• they have fewer than 50 employees;
• their turnover is not more than £6.5 million per year; and
• the ‘balance sheet total’ is less than £3.26 million.

The £50,000 limit is also available for unincorporated organisations, partnerships and sole traders, but in the latter case, the limit would apply in total to all (ie business and personal) accounts held by the customer.

One possible area for concern is whether deposits held in different members of a banking group are covered. In this case, if each of the banks is separately authorised by the Financial Services Authority, the FSCS would pay compensation up to the limit of £50,000 per person, per authorised institution.
If each of the banks is not separately authorised but is covered by the parent company's authorization, the FSCS would pay compensation up to the limit of £50,000 once, irrespective of how many different institutions a person held accounts with.

Deposit takers in the Channels Islands and Isle of Man are not covered by the scheme. 

Read the  guide to making a claim.