On Oct. 14, UK Treasury issued small business turnover limit order.
UK Treasury issued The Building Societies Act 1986 (Amendment of Small Business Turnover Limit) Order 2024 (StIn 2024/1024), amending Building Societies Act 1986.
Increases small firm turnover limit in a relevant financial year from £1,000,000 to £6,500,000, correspondingly amends reference to equivalent amount in other currency.
Purpose
Amends Building Societies Act 1986 (BSA 1986 (UK)), section 7(10), (11) by increasing turnover limit in relevant financial year for definition of a small business in section 7(10) from £1mn to £6.5mn; and makes a corresponding amendment to the reference to the equivalent limit in any other currency in subsection (11)(c).
Under section 7(1), (2) of the 1986 act, subject to some exclusions, building societies are required to raise at least 50% of their funding from members’ deposits.
The rest can be raised from other sources, known as wholesale funding.
Deposits by small businesses with a society, or any subsidiary undertaking of the society, are excluded from the wholesale funding limit by section 7(3)(aa).
Under section 7(3)(aa) of the 1986 act read with section 7(3A) up to 10% of the value of deposits by small businesses is disregarded in determining the value of a building society group’s funds from all sources - which is described as X in section 7(2).
As provided in section 7(1) of the act, value of shares held by individuals in a society - Y in section 7(2) - must represent at least 50% of the value of group funds.
By amending the definition of a small business in section 7(10), this order will exclude a larger range of deposits with building societies by small businesses from funding limit, thereby providing building societies with more flexibility in their funding sources.
This will also help building societies to better compete with ring-fenced retail banks for deposits from small firms; proposed £6.5mn new small business turnover limit is already used to classify smaller firms whose deposits must be held within ringfence.
