Anti-Money Laundering Checks Explained: Sole Trader and Limited Company

When purchasing a property in the United Kingdom, one of the first requirements you will encounter is the Anti-Money Laundering (AML) assessment. Solicitors and conveyancers are legally obliged to confirm that the funds being used for the purchase come from legitimate sources.

Every buyer will need to undergo these checks, but the exact documents and evidence required will depend on your circumstances. 

If you are buying as a sole trader, the focus is on you as an individual and your business income. If you are a director or shareholder of a limited company, then both your personal finances and the company’s financial position may be subject to scrutiny.

Understanding what will be asked of you in each case can help you prepare in advance and avoid unnecessary delays.

If You Are a Sole Trader

As a sole trader, there is no legal distinction between yourself and your business. You are personally responsible for all business income, outgoings, and liabilities. For this reason, AML checks concentrate on verifying your personal identity, your financial history, and the legitimacy of your business earnings.

You should expect to provide:

• Proof of identity: such as a valid passport or photocard driving licence.

• Proof of residential address: such as a recent utility bill, council tax demand, or bank statement.

• Evidence of the source of funds: this may include personal savings, retained business profits, or the proceeds of selling assets.

• Taxation records: self-assessment returns submitted to HM Revenue and Customs, especially where your income is derived primarily from your business.

• Business bank statements: to demonstrate how income is generated and how money moves into your personal account.

• VAT registration and returns: if your business is VAT-registered, your solicitor may request evidence of VAT compliance as an additional verification of ongoing trading.

• Business accounts for the past three years: to provide a fuller picture of your financial stability and trading history, particularly if your business income is being relied upon to fund the purchase.

Because sole traders do not file accounts at Companies House, there is no independent public record to cross-check. The solicitor will therefore rely directly on your documents, particularly your business accounts and VAT records, to confirm the legitimacy of your income.

If You Are a Director or Shareholder of a Limited Company

Limited companies are separate legal entities. As a director or shareholder, you may be using personal funds (such as dividends or salary drawn from the company) or company funds directly. AML checks in these cases often involve a deeper review of both your personal and corporate financial standing.

You should expect to provide:

• Personal identification documents: passport or photocard driving licence, plus proof of address such as a utility bill or bank statement.

• Company details: including the official name, registration number, and your role within the company.

• Ownership and control confirmation: if you hold more than 25 per cent of the shares, you must appear on the Persons of Significant Control register. Your solicitor may check this to verify your status.

• Company bank statements: if the company itself is contributing to the purchase, these will need to be reviewed to establish the source of funds.

• Company accounts: as filed with Companies House, to confirm financial health and transparency.

• Dividend vouchers or salary records: if you are relying on income taken from the company.

• Corporation Tax records: evidence that the company has filed and paid Corporation Tax correctly, which reassures the solicitor that the funds being used are legitimate and not derived from tax evasion or irregular company practices.

Although limited companies are more transparent than sole traders, owing to the requirement to file annual accounts and maintain statutory registers, there are additional complexities. Your solicitor will therefore focus closely on ownership structures, company accounts, and corporation tax compliance to ensure there are no irregularities.

Key Differences in AML Checks

• Sole Traders: Expect checks to focus entirely on your personal and business income. You may need to provide VAT records (if applicable) and up to three years of business accounts, in addition to personal identification and tax documents.

• Directors and Shareholders: Expect more extensive checks, covering both your personal finances and the company’s financial records. Corporation Tax compliance, company accounts, and ownership records will be important parts of the assessment.

Final Thoughts

Anti-Money Laundering checks are not designed to complicate your property purchase but to safeguard the system against financial crime. By preparing in advance, you can ensure that the process is as smooth as possible.

• If you are a sole trader, be ready to provide personal documents alongside business records such as VAT returns and accounts for the past three years.

• If you are a director or shareholder of a limited company, expect checks on both your personal role and the company’s financial compliance, including Corporation Tax records and company accounts.

The more organised you are with your documents, the quicker your solicitor can complete the AML checks and progress your purchase.

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