The government aims to review the financial thresholds set out in the Charities Act 2011 next year, which could lessen the reporting burden for some charities.
Baroness Barran, minister for civil society, made the announcement during the second reading debate on the Charities Bill in the House of Lords last week.
There are a number of financial thresholds set out in the 2011 act, with the accounting and reporting burden increasing as charities' incomes and/or assets increase.
The first such threshold is that charities need to register with the Charity Commission once their annual income reaches £5,000. There are also lighter touch accounting and reporting requirements for charities with incomes under £25,000 and under £250,000.
The highest threshold is set at an income of £1m or gross assets of £3.26m. At this level charities need to prepare full accounts on an accrual basis, have them audited and submit them to the regulator.
Law Commission recommendation
When the Law Commission carried out its review some respondents suggested that the thresholds should automatically increase with inflation, but the Law Commission did not think this was practical.
It instead recommended the government “periodically review all financial thresholds in the Charities Act 2011 with a view to increasing them, by secondary legislation, in line with inflation”.
Last week the minister confirmed that the first review should take place next year and that the government believed a review should take place once a decade.
“The government have accepted this recommendation and agree that such a review should take place at least every 10 years and, subject to resources, we will aim to undertake a review of the financial thresholds in 2022,” Barran told the House of Lords.
This review will include the thresholds for permanent endowment and failed fundraising appeals, which are included in the Charities Bill currently making its way through parliament.
According the Bank of England’s tool, between 2011 and 2020 inflation averaged 2.5% per year. This means that £1m in 2011 would be £1.25m if it had grown in line with inflation.
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