Important changes for Charities
18th May 2007

Chartered Accountants Naylor Wintersgill are advising local charities of a number of changes in registration and accounting procedures that came into effect on 23rd April as a result of the Charities Act 2006.

Prior to this date, most charities in England and Wales needed to register with the Charity Commission unless they had an income of £1000 or less and did not have permanent endowment or the use or occupation of land. Under the new rules, aimed at reducing the administrative burden for smaller charities, registration will only be required if annual income is over £5000. The Charities Act 2006 also eliminates the registration requirement for charities that own land or property that is a permanent endowment.

Other key changes impact on the financial reporting procedures for both company and non-company charities for accounting periods beginning on or after 27th February 2007. Non-company charities will only have to compile professionally audited accounts if gross annual income exceeds £500k or if assets total over £2.8 m and gross annual income exceeds £100k. Non-company charities, which fall beneath this threshold, should have their accounts independently examined rather than audited.

For charities that are registered as companies, accounts now need to be audited professionally if gross annual income exceeds £500k or aggregate assets total over £2.8 million. For company charities with an income between £90k and £500,000k and assets of £2.8m or less, accounts do not need to be audited if an accountants report is provided.

The latest legislative changes follow on from February’s announcement that trustees can now use charitable funds to purchase trustee indemnity insurance (TII), if they believe it is in the best interests of the charity to do so. Previously, this benefit required specific authorisation under the charity’s governing document or by the Charity Commission.  Consent is now required only if the governing document explicitly prohibits using the charity's funds to meet such premiums.

Further information is available from Carol Dovenor at Naylor Wintersgill on 01274 733184 and the Charity Commission website www.charity-commission.gov.uk.