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Non Profit and Charity Accounting

Charity finance is completely different to business, not only in the aims and objectives of the organisations themselves but also because charity accountants need to be aware of complex regulations and reporting requirements that only apply in the third sector.

The charity accounting SORP (statement of recommended practice) is issued by the Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator as a joint body recognised by the Financial Reporting Council.

Components of charity accounts

Under the SORP, a charity's accounts must include:

  • A statement of financial activities (SOFA) including an analysis of your charitable organisation's income and expenditure.
  • A balance sheet setting out any assets, liabilities and retained funds your charity might hold.
  • A cashflow statement.
  • And, for charities that are trading as limited companies, income and expenditure accounts.

As specialist accountants for charities, we can produce and manage all of the required documents and processes on your behalf, freeing up time for you to focus resources on your charity's core social mission.

Charity bookkeeping

It's always important to keep good financial records but charity and non-profit bookkeeping brings an added requirement for accountability and transparency to donors, funders, supporters and stakeholders.

For charities with a retail or trading division, such as those operating cafes or shops, it might mean keeping track of income and expenditure.

That might also mean taking into account the Gift Aid status of donors and tracking the Gift Aid component of the subsequent sale of donated items.

Charity auditors

In England and Wales, charities must be audited if their gross income exceeds £500,000 in the accounting period, or if it has gross assets of more than £3.26m and income exceeding £250,000.

Under charity law, organisations with gross income of more than £25,000 per year have to arrange external scrutiny of their accounts, as agreed with the charity's trustees.

We have years of experience in charity auditing and conduct rigorous, appropriately challenging audits and external examinations that meet the requirements and standards of the SORP.

VAT for charities

Charities and not-for-profit organisations have special status and don't pay VAT on certain goods and services.

To claim this relief, you need to prove to the vendor that you're eligible. We can help manage this process and offer advice on making the most of the charity VAT partial exemption, identifying all the VAT reliefs to which your organisation might be entitled.

Though you don't have to register for VAT to claim those reliefs, HMRC's rules say you must do so if your charity's VAT taxable turnover is more than £85,000. We offer a charity VAT service as part of our wider package of accounting products and can manage VAT returns on your behalf.

Next steps

Get in touch for a free consultation on your charity accounting requirements to find out how we can help your not-for-profit or charity organisation.

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