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Charity audit threshold increase

Posted by: edwinsmith on April 22nd, 2015

The government has increased the income threshold for the statutory audit of charity accounts from £500,000 to £1 million. This comes into effect for charity accounts with accounting periods ending 31 March 2015 onwards.

Also where gross assets of a charity exceed £3.26 million then if the income exceeds £500k (from £250k) a statutory audit will still be required.

Charities that can take advantage of the audit threshold increase will still require an Independent Examination if their gross income is over £25,000. With an Independent Examination there is less work involved than a full audit (although there are still Charity Commission Directions that need to be completed/followed as part of examination work). Unlike a full audit the internal financial internal controls operating within the charity would not be checked. Compared to an audit report the examination report will provide a more limited form of security but the report must still, as quoted from guidance below.

‘● confirm that no evidence has been found that suggests certain things have not been done by the charity, such as not maintaining proper accounting records; and

● provide a statement on specific matters that have come to their attention as the result of the examination procedures specified in the Directions.’

Please contact us  for further advice on charity accounts etc.

Filed under: Audit, Charities

Charity accounts requirements – incorporated charities

Posted by: edwinsmith on June 28th, 2013

This article follows on from last months Charity accounts requirements.

Charities incorporated under the Companies Acts need to consider the financial reporting requirements under the Companies Acts and the Charities Act. All incorporated charities must prepare accounts under the accruals basis – there is no option for receipts and payments accounts for those with gross income less than £250,000.

Audit exemption under the Companies Acts is available to small charities that satisfy the criteria for small companies but the criteria for an audit under the Charities Act are lower. However, if the company qualifies as small but at least 10% of the members of the company request an audit, then an audit under the Companies Act must take place. The articles of association or constitution or a donor to the charity may also require that the accounts are examined by an independent person or that a full audit is required even if the charity meets the criteria for exemption from audit.

To qualify as a small charitable company the charity must meet two out of the following criteria:-

Gross income < £6.5m
Gross assets < £3.26m
Number of employees     < 50

The audit process and requirements will be similar whether the audit is conducted under the Charities Act or the Company Acts but the report will be different in respect of the legislation it is being issued under.

Under charity law, the reporting requirements for registered incorporated charities that meet the small company thresholds are as follows:

Gross income

Gross assets

Report on the accounts IF audit exemption claimed under Companies Acts for small companies
Under £25,000   None
£25,000 - £250,000  

Independent examination report (no qualification required of examiner)
£250,001 - £500,000

Less than £3.26m

Independent examination report by a qualified examiner
£250,001 - £500,000

Over £3.26m

Charities Act Audit
Over £500,000  

Charities Act Audit

More information can be obtained from the Charity Commission.

If you require further help please contact us.

Filed under: Audit, Charities

Charity accounts requirements

Posted by: edwinsmith on May 30th, 2013

The financial reporting requirements applying to charities vary depending on their legal form. A charity may be

  1. Unincorporated and set up under a trust deed or constitution
  2. A registered company under the Companies Acts
  3. Incorporated by Royal Charter or under other legislation such as the Industrial and Provident Societies Acts
  4. Incorporated under the Charities Act 2011 – a Charitable Incorporated Organisation (CIO) available from December 2012.

A charity with a gross income of over £5,000 must register with the Charities Commission. All charities with an income over £25,000 must file financial statements with the Charities Commission within 10 months of the year end. Charitable companies set up under the Companies Act are also required to file their accounts with Companies House within 9 months of the year end. The new CIOs benefit from incorporation status but are only required to deliver one set of financial statements complying with charity law with the Charities Commission rather than with Companies House under company law as well.

The accounting requirements under charity law for registered unincorporated charities vary according to their size as follows:

Gross income Accounts   format Report on the accounts
Under £25,000 R&P None
£25,000 - £250,000 R&P Independent examination report (no qualification required of examiner)
£250,001 - £500,000 and gross assets under £3.26m Acc Independent examination report by a qualified examiner
£250,001 - £500,000 and gross assets over £3.26m Acc Audit
Over £500,000 Acc Audit

NOTES: R&P = Receipts and payments, Acc = Accruals accounts

However, the trust deed or constitution or a donor to the charity may require that the accounts are examined by an independent person or that a full audit is required.

Read more ›

Filed under: Audit, Charities

2012 Autumn Statement

Posted by: edwinsmith on December 6th, 2012

The Chancellor delivered the Autumn Statement on 5 December 2012 and the following announcements were made that affect tax rates and allowances etc.

Corporation Tax

  1. The main rate of corporation tax will be cut a further 1 % from April 2014 to 21%.

Business Tax (Companies and self employed)

  1. There will be a temporary but significant increase in the Annual Investment Allowance  from £25,000 to £250,000 for two years to support new investment  in plant machinery by small and medium sized businesses. It would appear the increase applies for two years from 1 January 2013.

Please contact us before taking any action as transitional rules will apply on the change from £25,000 to £250,000 in the period 1 January 2013 - to 31 March 2013 for corporation tax and to 5  April 2013  for income tax.

Income Tax

  1. A further  increase of £235 in the personal allowance for individuals in April 2013 taking it to £9,440 for the 2013/14 tax year.
  2. The higher rate threshold will be increased by 1% rather than inflation in 2014-15 and 2015-16.
  3. From 2014-15 there will be reductions to tax relief available on pension contributions. The lifetime allowance for pension contributions will be reduced from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000.

Capital Gains Tax

  1. The  annual exempt amount for capital gains will be increased by 1% each year in 2014-15 and 2015-16.

Inheritance Tax

  1. Inheritance tax nil rate band will increase by 1% in 2015-16 from £325,000 to £329,000.

Other measures announced include the following:

  1. Cancelling the 3.02 pence per litre fuel duty increase planned for 1  January 2013, deferred to 1 September 2013.
  2. Working age tax benefits (excluding disability and carers benefits) will be up rated by 1 % for three years from April 2013.
  3. State pension will increase by 2.5%.
  4. New tax avoidance legislation will be introduced.
  5. A Business bank will be created to provide finance and support for smaller businesses.

For full details see 2012 Autumn Statement

Please contact us  if you require further information and assistance.

Filed under: Audit, Budget Report, PAYE, Self Assessment, Tax

Audit threshold changes

Posted by: edwinsmith on October 5th, 2012

A new Statutory Instrument has been issued that amends the Companies Act 2006 in respect of accounts and audit exemptions for accounting periods ending on or after 1 October 2012. The new rules apply to companies and limited liability partnerships.

Audit thresholds for small companies have been aligned with accounting thresholds for small companies. Small companies will therefore be entitled to an exemption from mandatory audit if they meet two out of the three mandatory criteria:

  • No more than 50 employees;
  • No more than gross assets of £3.26 million;
  • Less than £6.5 million in turnover.

There are also new exemptions from mandatory audit for certain subsidiary companies and dormant subsidiaries from preparing and filing accounts.

Changes also make it easier for companies who currently use IFRS(International Financial Reporting Standards) voluntarily to switch from IFRS to UK GAAP when preparing their accounts.

Is your year end 30 September 2012? Are you required to have an audit under the old rules but not the new rules? If so and you would be interested in not having an audit for the year to 30 September 2012, contact us.

For further details please contact us.

Filed under: Audit