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.