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Prior House
6 Tilbury Place
Brighton
BN2 0GY
Tel. 01273 606160
Fax. 01273 673663
e: info@resourcecentre.org.uk
www.resourcecentre.org.uk

Charity Reports
and Accounts
This information sheet is a basic guide to the requirements for
charities to produce accounts, reports and returns each year. By law,
every charity must prepare a set of accounts. Most registered charities
must prepare a Trustees’ Annual Report, a set of accounts, and an
Annual Return.
The aim of accounts and reports is to provide a clear picture of your
charity’s activities and financial position. Although at first sight these
requirements may seem rather onerous to a small charity, they do
require you to define your aims and activities clearly and to manage
your finances well, both of which help to ensure that your
organisation is more effective. The Trustees’ Report is also an
opportunity to describe your work to the public and to funding bodies.
The reporting and accounting requirements are summarised in table
form, in appendix 2 for non-company charities and in appendix 3 for
company charities. The terms used in the tables are all described in the
information sheet itself.

Accounts, reports and returns
Our information sheet Charity
Registration gives guidance on
what constitutes a charity and
whether a group should
register with the Charity
Commission. This is available
on our website or from the
Resource Centre.

Updated January 2014

Page 1

Every charity, even if it is not required to register with the Charity
Commission, must keep accounting records (these include cash
books, receipts, records of grants, etc.) and prepare publicly
accessible reports of their accounts, and these must be retained
for 6 years.

Every charity with an annual income above £5,000 is required by
law to register with the Charity Commission.

Every registered charity must produce a Trustees’ Annual Report
and make them available on request (although it may not be
necessary to send it to the Charity Commission).

Those with an income below £10,000 are not required to submit
an Annual Return but must advise the Charity Commission of
changes to the charity's details including income and expenditure
each year (called an Annual Update).

Every registered charity with annual income above £10,000 must
submit an Annual Return to the Charity Commission each year.

Those with a gross income over £25,000 must also submit the
Trustees’ Annual Report and an independently examined or
audited set of accounts. These must be sent or filed online within
10 months of the end of the financial year. A company charity
must file its accounts at Companies House within 9 months.

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Page 2

Charity Reports and Accounts
n

Your constitution or other governing document will usually require
you to send the annual accounts and Trustees’ Annual Report
(where appropriate) to members and approve them at an AGM. It is
certainly good practice to do so even if you are not required to.

The type of accounts and report which a charity has to prepare
depends on its legal structure, its income and the value of its
assets.

Legal structure
Charities may be split into two basic categories:
1.

Non-company charities
a. Unincorporated associations
b. Charitable trusts
c. Charitable Incorporated Organisations (CIO)

Company charities (previously known as charitable companies)

Accounts
There are two forms of accounting:

For a brief description of
these forms of accounts,
please see appendix 1.

Receipts and payments

Accruals

A non-company charity with a gross income of £250,000 or less during
the year may prepare its accounts on either the receipts and payments
basis or the accruals basis. A non-company charity with a gross income
of over £250,000 must adopt accruals accounts. In late 2012 a new
form of charity – the CIO – is due to come into existence. This too will
be subject to the same accounting regulations as non-company
charities.
Charity law does not specify any format for preparing receipts and
payments accounts but they should be prepared in a consistent way
from year to year. They must include a statement of assets and
liabilities at the end of the year. The Charity Commission provides
straightforward forms for charities that wish to use them for their endof-year accounts.
A charity preparing accruals accounts must follow the Statement of
Recommended Practice (Charity SORP). The Charity Commission
provides packs to help a non-company charity prepare accruals
accounts and meet SORP requirements.
[NB. Gross income is defined by the Charity Commission as the total
recorded income excluding loans, proceeds from the sale of assets
and certain other ‘specialist’ types of income.]

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Charity Reports and Accounts
Scrutiny of accounts
There are two types of external scrutiny of accounts:
1)

Independent examination

Audit

The type of scrutiny required depends on whether the charity is a
company, its income and the wording in its constitution.

Non-company charities
n

A non-company charity with an income below £25,000 in the
relevant financial year is not required to have an external scrutiny
of its accounts, unless its constitution specifies an independent
examination or audit. However it is good practice to have your
accounts prepared or examined by someone independent.

A non-company charity with gross income above £25,000 but not
exceeding £500,000 in the relevant financial year must have an
external scrutiny of its accounts. Trustees may choose either an
independent examination or an audit, unless its constitution is
specific.

If the charity chooses an independent examination and its gross
income exceeds £250,000, the examiner must be a member of a
body specified by the Charities Act 2006. This is also a
recommendation for any non-company charity with an income
between £100,000 and £250,000.

A non-company charity with a gross income above £500,000 in the
relevant financial year (or one whose gross assets exceed £3.26m
and gross income exceeds £250,000) must have an audit.

A Charitable Incorporated Organisation is expected to be subject
to the same rules as other non-company charities.

Check your constitution
If your income in below £500,000 you need to check the wording in
your constitution. The Charity Commission has issued guidance that
the term ‘audit’ is open to interpretation.
If your constitution was approved before the 1993 Charities Act, then
audit will normally be taken to mean ‘the appropriate external scrutiny
required by the current legislation’. In this case you can have an
independent examination.
However, you will need to have an audit, or amend your constitution if:

your constitution was approved before 1993, but clearly states
that a professional auditor must carry out an examination or audit,
or

your constitution was approved after 1993 and refers to an audit.

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Charity Reports and Accounts
Unless your constitution has the power of amendment you will need
to get Charity Commission approval.

Company charities
Generally, company charities prepare accounts under company law and
must also follow the Charity SORP. However, the regulations applying
to small company charities have been simplified by the Charities Act
2006 and Companies Act 2006. Company charities which qualify as
small companies under company law are subject to charity law
provisions – they now come under the same accounting and
examination regimes as non-company charities. The definition of a
small company is that it meets two out of the following three criteria:
1.

Annual turnover not exceeding £5.6m

Assets not exceeding £2.8m

Up to 50 employees

A company charity with either a gross income above £500,000 or
gross assets above £3.26m must have accounts audited by a
registered auditor. For a small company, the audit will be under the
Charities Act.

A company charity with gross income not exceeding £500,000 and
assets not exceeding £3.26m is not required to have an audit
under company law and may instead have an independent
examination under charity law. If the charity’s gross income
exceeds £250,000, the examiner must be a member of a body
specified by the Charities Act 2006. This is also a recommendation
for any company charity with an income between £100,000 and
£250,000.

A company charity with an income below £25,000 in the relevant
financial year is not required to have an external scrutiny of its
accounts, unless its constitution specifies an independent
examination or audit. However it is good practice to have accounts
prepared or examined by someone independent.
This exemption does not apply to company charities which have
charitable or non-charitable subsidiaries – these must prepare
group accounts.

Company charities must send accounts to Companies House
within nine months of the end of their financial year.

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Charity Reports and Accounts
Independent Examination of Accounts
This is the process of scrutinising a charity’s accounts below the level
of a professional audit. The procedures are defined by law and by the
Directions of the Charity Commission. The independent examiner will
gain an understanding of the charity, look at the accounts and
supporting documents and write an independent report to accompany
the accounts and Trustees’ report.
The duty of the independent examiner is to give what is called
‘negative assurance’. After looking at the evidence the examiner
reports whether or not certain matters “have come to my attention”.
These include lack of accounting records and the failure of accounts
to comply with the Charities Act. As well as scrutinising the accounts,
the independent examiner may also help prepare the accounts in the
format required and help prepare the Trustees’ Annual Report.

Association of Charity
Independent Examiners (ACIE),
Association of Charity
Independent Examiners, The
Gatehouse, White Cross, South
Road, Lancaster, LA1 4XQ
Tel. 01524 34892
email: info@acie.org.uk
Website: www.acie.org.uk

An independent examiner may be a charity treasurer or finance worker
or an accountant from industry or the public sector. The key is that
they must have a good understanding of charity finance and the law.
To carry out an independent examination of a charity with an income
above £250,000 the examiner must have a professional qualification or
be a member of a body specified in the Charities Act 2006, such as the
Association of Charity Independent Examiners (ACIE).
When choosing an independent examiner, you should make sure that
he or she is fully independent of your charity and able to carry out a
proper charity independent examination. The Charity Commission gives
guidance on its website and in its publications on selecting an
examiner. ACIE can give you the details of local examiners who are on
its register. There is however no requirement to register with ACIE and
there are many unregistered examiners who fully meet Charity
Commission standards.

Audit
The audit process is defined by law and is carried out by a Registered
Auditor (a chartered accountant). An audit is the highest level of
scrutiny of accounts and the auditor looks for positive evidence to
enable the accounts to be described as a “true and fair” view.
Every charity with an annual income above £500,000 (or with an income
over £250,000 and assets above £3.26m) is required to have an audit.
Funding and other bodies may ask inappropriately for a copy of your
audited accounts, as the term ‘audit’ is often used very loosely. If your
charity is not required to have an audit, point this out and send them
your annual accounts together with the independent examiner’s report.

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Charity Reports and Accounts
Trustees’ Annual Report

The Charity Commission
website has standard Annual
Report forms that you can
download and complete at
www.charitycommission.gov.uk.
They also have examples of
reports from a range of
charities in their ’Charity
Requirements and Guidance/
Charity accounting and
reporting’ section at
www.charitycommission.gov.uk

Every charity must prepare a Trustees’ Annual Report. The report
should explain the aims of the charity and how it is achieving them. It is
a chance to show the benefit to the public of the charity’s work and
also show funders how their money was used and what was achieved
with it. Since the financial year 2008-09 every charity has been required
to demonstrate that its activities are for the public benefit, as set out
in Charity Commission guidance. Every charity with a gross income
above £25,000 must submit a PDF of its Trustees’ Annual Report to the
Charity Commission.
There are legal requirements for the contents of the report and these
depend on the type of charity and its income. There is a useful list of
headings which meet these legal requirements in the Charity
Commission publication CC15b (section H). The headings cover reports
from a simplified report to a full report. A simplified report must give
basic details such as the names of trustees, the structure of the
charity and a brief financial review as well as details of its aims and
activities. You may find it useful to look at the report of a charity
similar to your own. There are many local charities who will make one
available or you can visit the Charity Commission website which has
examples of reports from a range of charities.

A charity with a gross income of £25,000 or less must prepare a
simplified annual report. A charity of this size should not send its
annual report and accounts to the Charity Commission unless the
Commission asks for them.

A charity with a gross income of over £25,000 but not exceeding
£500,000 and with total assets not exceeding £3.26m must
prepare an annual report but it may be simplified. However
charities are expected to provide ‘full disclosure’, so you should
aim to give the maximum amount of detail appropriate to the size
of your charity.

A charity with a gross income above £500,000 (or whose gross
assets exceed £3.26m and gross income exceeds £250,000 must
complete a full annual report.

A company charity must also prepare a Directors’ Report under
Companies Act. In practice, this report is usually expanded to
include all the information required in the Trustees’ Annual Report.
A company charity must file its accounts at Companies House
within 9 months of the end of its financial year.

Charities are not limited by the Statement of Recommended
Practice (SORP) and may also include other matters such as an
environmental impact report or a chair’s report.

The annual report and accounts must be sent to the Charity
Commission or filed online within 10 months of the end of the
financial year. It is an offence not to submit the Trustees’ Annual
Report and trustees can be fined.

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Charity Reports and Accounts
Annual Return
An Annual Return is an online form that must be completed each year by
all registered charities with incomes over £10,000. You will receive an
email reminder to prompt you to go online and fill in the form. You’ll be
asked to update details such as name of trustees, bank account and
charity classification and activities. You are also asked to confirm that
there have been no serious incidents such as fraud.
In 2013 and 2014 there have been additions to the compulsory
questions that are included in the Annual Return form. Annual Returns
submitted for financial years ending in 2013 must include information
about whether the charity is registered for gift aid, details of land and
buildings owned by the charity, number of volunteers, and details of
overseas spending and activities.
For financial years ending on or after 1st January 2014, Annual Returns
must also include information on whether the charity:

pays its trustees

raises funds from the public

works with a commercial business that raises money for the charity

has a trading subsidiary (a company whose profits go to the charity)

has policies for risk management, investment, safeguarding
vulnerable beneficiaries, managing conflicts of interest, managing
volunteers, and handling complaints.

You must return your completed Annual Return to the Charity
Commission by the deadline given on the Return. It is an offence not to
submit it.
Every charity with a gross income above £1m had to complete a
Summary Information Return for financial years ending before 1st
January 2014. This will no longer be required for financial years ending
on or after 1st January 2014.
A charity with a gross income up to £10,000 does not have to complete
an Annual Return. However, the Charity Commission will send it an
Annual Update form which it is expected to complete in order to keep
its entry on the Charity Register up-to-date.

Registered status to appear on documents
A registered charity with a gross income of £10,000 or more in the last
financial year is required by law to state on a range of documents that it
is a registered charity and to quote its registration number. These
documents include cheques, headed notepaper, advertisements, notices,
material placed on websites and any documents used for fundraising or
membership purposes.

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Page 8
Charity Commission,
PO Box 1227,
Liverpool L69 3UG.
Tel 0845 300 0218 Typetalk
0845 300 0219
www.charitycommission.gov.uk
Accounting and Reporting by
Charities: Statement of
Recommended Practice (SORP
2005) is available from
CCH publishers for £15
Tel. 0844 561 8166
www.cch.com
or on the Charity Commission
website for free. Go to
charitycommission.gov.uk and
type “SORP 2005 documents”
into the search bar.
All these publications are
available from the Charity
Commission website. Go to
charitycomission.gov.uk and
type the name and number of
the publication into the search
bar.

If you do not have access to
the internet you can come into
the Resource Centre and we
will help you to find the
information you need and
print it out.

Charity Reports and Accounts
Charity Commission guidance and packs
The Charity Commission provides lots of really useful guidance and
information about how to prepare your accounts, trustees annual
report and annual return.
The following Charity Commission publications are particularly useful.

Charity Reporting and Accounting (CC15b ) – guide to the
accounts, annual reports and annual returns which charities are
required to H contains a useful list of headings which cover the
legal requirements of an annual report.

Accounting and Reporting by Charities: Statement of
Recommended Practice (SORP 2005) – full details of the type and
content of accounts and Trustees’ Annual Reports. This
publication is relevant to every charity, and is essential for
charities preparing accruals accounts.

Receipts and Payments Accounts Pack (CC16) – guidance for
charities preparing receipts and payments accounts and forms for
completing the accounts and the Trustees’ Annual Report.

Accruals Accounts Pack (CC17) – guidance for non-company
charities preparing accruals accounts and forms for completing
the accounts and the Trustees’ Annual Report

Charities and Public Benefit – section G gives guidance on
reporting on the public benefit of your charity.

Independent Examination of Charity Accounts: Directions and
guidance notes (CC63a).

Page 9

Charity Reports and Accounts
Appendix 1 - forms of accounting
Receipts and Payments Accounts
This is a simplified form of accounting which summarises the money
received and paid out during the financial year. The final balance shows
how much money your charity has at the end of the year.
Charity law does not specify any format for preparing receipts and
payments accounts but they should be prepared in a consistent way
from year to year. The Charity Commission provides straightforward
forms for charities which wish to use them as a format for their
accounts. If you present receipts and payments accounts, you must
also provide a statement listing assets and liabilities at the end of the
year. This shows debtors (ie money owed to the charity), creditors (ie
money which the charity owes) and the value of equipment, land and
buildings.
This type of accounting is much easier for a very small charity. It is
also adequate for a slightly larger charity so long as its financial
dealings are straightforward. However it does not always give a clear
picture of the year’s finances and can make it harder to compare one
year with the next. For example, if you were to pay your annual
insurance at the beginning of April and pay the following year’s
premium at the end of March, your accounts would show a large
insurance bill in the first year and none in the following.
When the financial structure of the charity becomes more complicated,
it may be better to adopt accruals-based accounting. You may need to
get professional advice if you move over to accruals accounting in
order to ensure that you make the change smoothly and keep the right
sort of records during the year to enable your charity to complete the
annual accounts required.

Accruals Accounts
Accruals accounts present a clearer picture of the charity’s income and
expenditure 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
the charity’s financial position at the end of the year.
Accruals accounts adjust for debtors, creditors and accruals (ie sums
which you owe for regular use of services such as electricity, gas and
telephone but which have not yet been invoiced). It also treats assets equipment, land and buildings - in a different way from receipts and
payments accounts. For example, the full cost of equipment above a
certain price is not shown as expenditure. It is an asset to the charity
as it has a resale value, although this declines over time. This
equipment (known as capital equipment) is therefore depreciated over
a period of, say, 4 years and the annual charge for depreciation is

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Charity Reports and Accounts
shown as expenditure. The current value of the equipment is shown
on the balance sheet as an asset, together with the value of all the
other resources of the charity.
A charity preparing accruals accounts must follow the Statement of
Recommended Practice (Charity SORP). The report and accounts must
consist of a balance sheet, a statement of financial activities (SOFA)
showing incoming resources and how they were used, and explanatory
notes.
The Charity Commission provides packs to help a non-company charity
prepare accruals accounts and meet SORP requirements.

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