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What are the charity commission accounts requirements?

This guide summarises the Charity Commission’s requirements for charities to produce accounts, reports and returns each year.
What are the charity commission accounts requirements?

There are different charity accounts requirements for different sizes and types of charity. For example, the requirements depend on:

  • Whether your charity is also a company (and therefore registered with Companies House and the Charity Commission) or a charitable incorporated organisation (CIO) and solely registered with the commission
  • Your charity’s income for the current financial year
  • The value of your charity’s assets
  • Whether or not your charity is of a size that is required to be registered as a charity with the commission.

These factors will determine:

  • What type of accounts you need to prepare
  • What information is needed in the trustees’ annual report
  • Whether the accounts need an independent examination or audit
  • What information must be sent to the Charity Commission.

By law, every charity must prepare a set of accounts and a trustees’ annual report. The aim of accounts and reports is to provide a clear picture of your charity’s activities and financial position. They also help to maintain public trust in the charity sector.

Do all charities have to register with the Charity Commission?

In England and Wales, you must apply to register your charity if its income is £5,000 a year or more, or if it’s a charitable incorporated organisation (CIO). Different rules apply if your charity is based in Scotland or Northern Ireland. You should check with the Charity Commission (for UK-based charities) or the Charities Regulator (for charities based in Ireland).

What are the types of charity accounts? 

All UK charities, even those not required to register with the Charity Commission, must keep accounting records, such as cash books, receipts, and records of grants. They must also prepare annual accounts and a trustees’ annual report, detailing your work for the year.

There are two forms of accounting:

  1. Receipts and Payments Accounts
  2. Accruals Accounts.

The type of accounts required depends on your charity’s income and whether or not it is a company.

1) Receipts and payments accounts 

This is a simplified form of accounting. You summarise the money your charity receives and pays out during the financial year. The final balance shows how much money your charity has at the end of the year.

If you are a relatively small unincorporated charity or CIO (with gross annual income under £250,000) and fairly straightforward finances, you may choose to prepare your accounts in this way. It is good practice to prepare your receipts and payments accounts in a consistent format from year to year. You must also provide a statement listing your charity’s assets and liabilities at the end of the year.

2) Accruals accounts

All charitable companies and unincorporated charities and CIOs with an annual income of over £250,000, must prepare accruals accounts. You may also choose to adopt accruals accounting because your charity’s financial structure is more complex. Professional advice is available to ensure a smooth and accurate handover from receipts and payments accounts to accruals accounts.

Accruals accounts present a clearer picture of the charity’s finances during the year. They show income and expenditure as these relate to the year in question, rather than simply recording money received and paid out. The balance sheet gives a ‘snapshot’ of your charity’s financial position at the end of the year.

Accruals accounts are adjusted for debtors, creditors and accruals (money you owe but have not yet been invoiced for). Using this form of accounting also means capital expenditure (such as the cost of equipment) can be depreciated over a period of time (such as four years). The annual charge for depreciation is shown as expenditure and the current value of the equipment shown on the balance sheet as an asset.

If your charity prepares accruals accounts, you must follow the Statement of Recommended Practice (Charities SORP). In summary, that means your charity needs to present a report and accounts that includes a balance sheet, a statement of financial activities showing incoming resources and how they were used, along with explanatory notes. The Charities SORP website is an excellent resource.

If your charity has an annual income above £25,000, the accounts will need to be independently examined or audited. The type of external scrutiny depends on your charity’s legal structure, income and constitution.

What do charities need to prepare for their accounting reports?

As well as the annual accounts, most charities will also need to prepare the following:

Annual return

All CIOs and registered charities with an annual income of over £10,000 must complete an annual return to the Charity Commission. The deadline is 10 months after the end of your financial year. However, in practice, the commission strongly encourages you to do so much sooner than this in order to give an up-to-date and current picture of your charity to those interested in your charity’s work.

Most of the information you need for your annual return will be in your accounts or your trustees’ annual report.

Trustees’ annual report

Every registered charity must prepare a trustees’ annual report. The legal requirements for the contents of the report depends on the type of charity and its income. Generally the trustees’ annual report will explain:

  • Your charity’s aims and achievements
  • The structure of your charity and names of trustees
  • How you use your funds and what you have done with the money you raised.

You can use your annual report as an opportunity to communicate other information, such as the benefits of your work, if you wish. If your charity’s gross income is above £25,000 a year, you also need to submit this report to the Charity Commission.

The Charity Commission provides useful guidance to help you prepare your accounts, trustees’ annual report and annual return.

What are the requirements for charities exempt from registration? 

Even if your charity is exempt from registration, you must still keep accounting records and prepare annual accounts. These accounts should be prepared in a true and fair view, following the applicable SORP requirements.

You also need to make copies of those accounts available to the public on request. However, you don’t need to send them to the Charity Commission unless they specifically ask for them.

You’re not required by law to prepare an annual report. However, it is good practice to do so. In exceptional circumstances, the Charity Commission can make this a requirement from the trustees.

If your charity’s annual income is more than £25,000, your accounts will need to be independently examined or audited. Even if it’s below £25,000, your charity’s governing document may require it. As with registered charities, the type of external scrutiny required depends on your charity’s income and assets and whether it is a company.

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