Charities SORP 2026 and possible changes to the Scottish charity audit threshold

The Charities SORP-making body provided an update in December 2024 for charities and their accountancy advisers on the anticipated timeline for the next edition of the Charities SORP (SORP 2026).

Along with that update it has also published a paper setting out some practical steps charities should be taking now to prepare for the implementation of changes to lease accounting and revenue from contracts with customers arising from the latest Periodic review to FRS 102.

Update on the Charities SORP 2026 

This latest update was published on the homepage of the Charities SORP microsite and further expected updates are likely to be published here too and should therefore be available via the same link included above.

A consultation draft of SORP 2026 is expected in March 2025, with a public consultation period of 12 weeks. The final version should be issued in Autumn 2025. The Charities SORP 2026 will apply to accounting periods beginning on or after 1 January 2026, in line with the implementation timetable for the revised edition of FRS 102 (issued in September 2024).

Charity accounting regulations in the UK 

There are three charity law jurisdictions in the UK: Scotland; Northern Ireland; and England and Wales. Each jurisdiction has their own charity accounting regulations. These regulations permit non-company charities below a certain size to prepare receipts and payments accounts rather than ‘true and fair’ accounts. However, this article is relevant to charities preparing ‘true and fair’ accounts in accordance with FRS 102 and the Charities SORP.

Anticipated changes to the Charities Accounts (Scotland) Regulations 2006

We are aware that the Scottish government plans to update the Charities Accounts (Scotland) Regulations 2006, issued under the Charities and Trustee Investment (Scotland) Act 2005, to require charities to comply with the Charities SORP 2026.

In Scotland, all charities, including charitable companies, are required to apply the accounts preparation requirements set out in the 2006 Regulations, although universities and colleges and registered social landlords are required to apply the appropriate specialist SORP rather than the Charities SORP.

It is possible that the anticipated update to the 2006 Accounting Regulations won’t permit compliance with the Charities SORP 2026 until periods beginning on or after 1 January 2026. This would mean that early adoption of the Periodic review amendments to FRS 102 and SORP 2026 wouldn’t be possible.

This is unlikely to be an issue for most charities, but it does mean that any charity required to adopt the Charities SORP for the first time prior to this date, for example, due to no longer being eligible to prepare receipts and payments accounts, or due to being newly established and meeting the criteria for preparing SORP accounts, will need to comply with the version of the Charities SORP and FRS 102 applicable to periods beginning before 1 January 2026. In respect of the Charities SORP this will be the edition published in October 2019.

It is therefore important that Scottish charities and their advisers look out for any messaging from the Scottish Government or OSCR regarding the early adoption of the Charities SORP 2026 and the Periodic review amendments.

Scottish government to consult on raising the charity audit threshold

As the 2006 Accounting Regulations are being updated, the Scottish government also intends to take the opportunity to consult on revising the income criterion of the Scottish charity audit threshold during 2025. We envisage that a rise to gross annual income of £1,000,000 or more is the most likely outcome.

At the moment a charity must receive an audit by a registered auditor if in any financial year:

·       It has gross income of £500,000 or more, or

·       the aggregate value of its assets (before deduction of liabilities) at the end of the financial year exceeds £3,260,000, or

·       it is required to do so by the constitution of the charity, any other enactment, or on the instruction of its trustees.

We have been in regular dialogue with the Scottish government about the audit threshold to make the case for an increase. If the case for increasing the audit threshold is accepted by the Scottish government, we anticipate that this will coincide with the implementation of SORP 2026. However, the final outcome is yet to be determined.

Accounts preparation requirements in Northern Ireland

In Northern Ireland, all charities, including charitable companies, are required to prepare their accounts under the Charities Act (Northern Ireland) 2008 and the Charities (Accounts and Reports) Regulations 2015. Specialist SORPs should be applied as set out in the 2015 Accounting Regulations.

Regulation 4d) of the 2015 Accounting Regulations requires the application of the current version the Charities SORP i.e. the extant version at any particular reporting period, so early adoption should be feasible once the Charities SORP 2026 has been finalised. However, charities and their advisers should remain alert for any specific guidance on this point from the Charity Commission for Northern Ireland.

Accounts preparation requirements in England and Wales

In England and Wales, the legislative basis for preparing charity accounts is more complex, with the Charities Act 2011 and the Charities (Accounts and Reports) Regulations 2008 applying to the preparation of the group and individual accounts of non-company charities and the group accounts of charitable companies below the Companies Act 2006 threshold for preparing group accounts. As in the other charity law jurisdictions in the UK, a specialist SORP may apply.

The 2008 Charity Accounting Regulations haven’t been updated since they were first issued meaning that they still refer to the Charities SORP issued in March 2005, which reflects old UK GAAP. We aren’t aware of any plans to amend the 2008 Charity Accounting Regulations, but of course this is possible.

The current stated view of the Charity Commission for England and Wales is that the requirement to prepare accounts that are ‘true and fair’ takes precedence over compliance with the requirement to apply the Charities SORP 2005.

Therefore, we would expect that it will be acceptable for charities in England and Wales to prepare accounts in accordance with the 2008 Charity Accounting Regulations where the Charities SORP 2026 is applied provided the approach taken is clearly advised in the notes to the accounts.

We recommend that charities follow any guidance issued by the Charity Commission for England and Wales (CCEW) on the adoption of the Charities SORP 2026, including whether the early adoption of the Periodic review amendments to FRS 102 and the Charities SORP 2026 is permissible for accounts prepared under the 2008 Charity Accounting Regulations. This has been possible for previous editions of the Charities SORP issued after 2005.

Companies Act 2006

Charitable companies, including charitable parent companies preparing group accounts, should always prepare true and fair accounts under the Companies Act 2006, in addition to any other applicable legislation.

Module 15 of the Charities SORP (October 2019) applies to charities established under company law. It makes the following statements in relation to compliance with both company law and the SORP itself.

“Charities registered as companies under company law (charitable companies) must comply with the reporting requirements of company law. However, charitable companies must adapt the presentation and headings used in their accounts for the special nature of the company and its activities. (paragraph 15.1)

In jurisdictions where adherence [by charitable companies] to this SORP isn’t a legal requirement, there is a strong presumption that charitable companies will comply with this SORP in order for their accounts to give a true and fair view as required by company law. (paragraph 15.2)

Charitable companies using this SORP must adapt their statement of financial activities (SoFA) to meet the requirements of company law or prepare a separate summary income and expenditure account. (paragraph 15.3)”

No changes of substance to the above requirements and guidance are anticipated in the Charities SORP 2026.