The consultation, Consultation on financial thresholds in charity law – GOV.UK, was published on the 3 April 2025 by the Department for Culture, Media & Sport (DCMS) and seeks views on a number of financial thresholds to balance appropriate regulation whilst seeking to reduce the administrative burden on smaller charities. PEM contribute to consultation responses so please do respond individually but if there are any matters of concern you would like to raise with us, please do reach out.
This consultation is running concurrently with the consultation on the statement of recommended practice (SORP) for charities accounting under FRS 102; the consultations are not linked. Decisions around the thresholds may have an impact on the requirements of the SORP, therefore we would encourage charities to respond to both consultations highlighting the connections.
The proposed options are broadly to keep the thresholds the same, apply an inflationary increase, or apply an increase which is less than inflation, that is something between the two.
The consultation covers 21 thresholds of which some have been set out below.
Thresholds Amended by the Charities Act 2022 relating to:
- gifts
- failed appeals
- ex gratia payments
- release of permanent endowment.
Are to remain unchanged.
In many cases the consultation highlights the status quo or the limited increase as the DCMS recommended option. Charities are often in the public focus and considered to be of public interest: as a result there is a special independent examination regime as well as an audit threshold which is currently lower than the company audit threshold by a factor of 10.
This consultation is the first opportunity in a number of years to make a change. The registration threshold was set in 1995 and many of the thresholds were last changed in 2009.
In addition, changes in accounting driven by the latest changes to the Financial Reporting Standard in the UK (FRS 102) may mean that small charities with leases will see a dramatic change in their gross assets as leased assets are recognised on balance sheet. This may mean that more charities fall within the audit threshold currently based on income of over £250,000 and assets of over £3,260,000.
The threshold consultation still does not address what happens to charities who year-on-year move between the thresholds, perhaps due to legacy receipts or the lumpy recognition of grant income. For a company, the legislation sets out a two year rule which means that one-off changes would not necessarily impact the reporting requirements. Perhaps a similar provision could be made for charities.
Whilst there is an on-going importance to balance responsible accounting and reporting with the administration costs, it is important that charities have their say in the discussion based on what it means to them.
Next steps
Respondents are invited to complete the online survey or send responses by email or post by 12 June 2025. The government aims to publish a summary of the consultation responses and an implementation plan within 12 weeks.
Read the latest Charities and Non-profit newsletter to find out more about further changes that will impact the sector.
If you would like to discuss how this guidance might affect you, please get in touch with our team.
This article was correct at the time of publishing.
