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Accounting

Shift to More Proportionate Accounting Regime for UK Charities

Strategic Insights

— 1 min read

The UK charity regulators, comprising the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator, and the Charity Commission for Northern Ireland, have finalized a new accounting framework for charities in the UK. This updated framework, known as the Charities Statement of Recommended Practice: Accounting and Reporting by Charities (SORP), aims to strike a balance between simplicity and transparency for charities, while ensuring donors and stakeholders have access to clear and comprehensive financial information. A key change is the introduction of three new tiers that set out expectations for increased transparency from the largest charities.

Key Takeaways:

  • The new SORP framework includes a three-tier reporting system, with Tier 1 applying to charities with incomes up to £500,000, Tier 2 for those with incomes between £500,000 and £15 million, and Tier 3 for charities with incomes above £15 million.
  • Charities with incomes above £15 million will be required to produce a detailed statement of cash flows, unless exempt under Financial Reporting Standard 102 (FRS 102).
  • The SORP has been refreshed to include charity sector-specific examples, clearer guidance on reporting financial reserves and plans for the future, as well as dedicated sections for impact reporting and environmental, social, and governance issues.
  • The SORP-making body has opted to confirm the three-tier reporting framework for the time being, with consideration for potential modifications in the future.
  • The updated SORP takes effect for accounting periods starting on or after 1 January 2026.

Statistics:

  • Over 5,130 non-company charities in England and Wales will be eligible to produce receipts and payments accounts instead of detailed accruals accounts, following changes announced by the Department for Culture, Media and Sport (DCMS).
  • The threshold for producing accounts reflecting the SORP has been changed from £250,000 to £500,000 for charities in England and Wales.
  • The Charity Commission for England and Wales will commence work with DCMS to explore further simplifications to the regulatory landscape, including the development of a standard form and content for receipts and payments accounts and the digitization of charity accounts filing.
  • The updated SORP has been the subject of extensive consultation, attracting 150 responses from charities, professionals, and independent bodies.

Sources:

  • United Kingdom -- Executive Government Non-Ministerial Departments Press release
  • Financial Reporting Standard 102 (FRS 102)
  • Charity Commission for England and Wales
  • Office of the Scottish Charity Regulator
  • Charity Commission for Northern Ireland

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