Welcome to the second charity update blog, to read last weeks click here. This weeks blog focusses on the accounting and tax updates which may affect charities. If you have any queries regarding the topics raised please contact us and we will be happy to help.
The Statement of Recommended Practice for Charity Accounting (‘the SORP’) sets out the reporting framework that charities preparing accounts on the accruals basis are required to follow. Issued in 2014, it is subject to frequent updates to ensure that it remains up to date.
The most recent update to the SORP, Update Bulletin 2, was issued over a year ago. Its impact is only now being felt as charities start to prepare their 2019 accounts.
The Bulletin contains a number of ‘clarifying amendments’ that take effect for accounting periods commencing on or after 5 October 2018. These provide guidance on how the existing requirements of the SORP should be interpreted in the areas of comparative information, the depreciation of fixed assets and the payment of Gift Aid by a subsidiary trading company to its charitable parent. On this last issue a separate Information Sheet has also been published providing guidance on the accounting by subsidiary companies in respect of Gift Aid payments.
There are also a number of changes introduced that take effect for accounting periods commencing on or after 1 January 2019 that are designed to ensure that the SORP remains consistent with the requirements of FRS102, the Financial Reporting Standard on which the SORP is based. The most significant of these relate to investment property, charitable mergers and the statement of cash flows. Although these are the most significant, other less significant changes are likely to impact a limited number of charities. To find out more click here.
New plans have been announced that will change the way the SORP will be developed from 2020 so that it better meets the needs of the users of charity reports and accounts. This follows a comprehensive governance review of the SORP development process in recent months.
These changes include:
If you are interested in joining a stakeholder group or applying for membership of the SORP Committee, details are included on the dedicated SORP website. The intention is to have representation from across the UK and Ireland to reflect the coverage of UK-Irish Generally Accepted Accounting Practice.
In July 2019 the Charity Tax Commission published a report setting out areas where reform of the tax system could be made for the benefit of the charity sector. Established by the NCVO and led by a former chairman of the Inland Revenue, the Commission’s proposals aim to boost charities and unlock a wave of giving.
Short-term proposals made by the Commission that could be introduced include:
The Charity Tax Commission is also advocating longer-term proposals for a comprehensive review of Gift Aid, VAT and business rates relief to ensure that they adapt to the changing ways that charities deliver their services in the 21st century.
Of course there is no guarantee that these proposals will ever make it into law, but with a potential change in government in the next few months it is hoped that the time is right for reform of charity tax.
Visit our blog page next week for another article on charity news, covering gifts and donations.
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