Digital filing of accounts
Many of us will have had the joy of filing accounts for our charities. All charities with income of over £25,000 have to file accounts with the Charity Commission every year (unless they’re an excepted charity). These accounts are filed by uploading a PDF, or a Word or Excel document that’s converted to a PDF, to the Charity Commission’s online filing service via your Charity Commission’s record.
Charitable companies and Companies House
For charitable companies, the situation is slightly different. Unless charities or their accountants use very specific software that allows them to file electronically, they have to print out the accounts, and post them to Companies House. (As a reminder, charitable companies aren’t allowed to file micro-entity accounts, even if that option is technically available online and you won’t be prevented from filing them.) Companies House takes the paper accounts you send in, does some basic checks, scans the accounts and makes them available online.
Due to concerns about the lack of scrutiny over our companies’ register (and how that has facilitated money-laundering and other illicit activity), the government has decided to tighten the regulatory regime with the Economic Crime and Transparency Act. This act gives Companies House the power to check a lot more of the information that is filed with them (including performing ID checks on directors), and to require the digital filing of accounts.
The announcement of the timeline for digital filing of accounts is expected over the summer, likely with a lead time of 15 months. Charitable companies will then be required to file digital accounts, using special software. Those accounts will then be much more searchable, and researchable, and comparable because information has to be tagged with labels called iXBRL, as large companies have had to do for years.
Now might be the time to consider converting to CIOs, which have the same benefits that companies confer (limited liability, corporate ownership of property, etc), but doesn’t involve filing accounts with Companies House as well as the Charity Commission! This is particularly relevant if you have an older charitable company, as it will give you the opportunity to revisit some of the older and possibly outdated provisions in your memorandum and articles.
Other charities & the Charity Commission
The Charity Commission is busy consulting with charities, and sector representatives and stakeholders, on what this means for them. If charitable companies will have to file digitally through software, the Commission sees an opportunity to enable charitable companies to file digitally with them too. And if they enable charitable companies to file digital accounts, then there’s an opportunity to enable other charities to do the same thing. We emphasise enable, because the Charity Commission doesn’t have the same power that Companies House has via the Economic Crime and Transparency Act to mandate digital filing. Stewardship is part of the Commission’s consultations, and we’ve stressed that not all charities have paid finance directors and financial controllers, and many are served by volunteer treasurers who don’t use expensive software. The Commission is looking at making free or inexpensive tools available that will allow Charitable Companies to file digitally as they will be obligated to do, and enable other charities to do the same.
So, what does all of this mean?
- Things are going to change. That is a given. If you’re a charitable company, you will not be able to file by post anymore, and will need to speak to your accountant, auditor or independent examiner early. Stewardship can help clients who require independent examinations to meet their filing obligations.
- You may want to take the opportunity to convert your charitable company to a CIO. You might want some legal help with this, and we can direct you.
- Lastly, we’re hearing from many charities and through industry groups that accounting firms are struggling with capacity due to resourcing constraints. It will be worth reviewing at an early stage whether you have the right support.
Quarterly emails for trustees, treasurers and Church and Charity Leaders. Practical tools, technical resources and expert guidance to safeguard your mission and ministry.