Charity accounting is not just corporate accounting with the word "charity" pasted on top. The Statement of Recommended Practice (Charities SORP) sets out how registered charities in England, Wales, Scotland, and Northern Ireland must prepare their accounts, and the legal form you chose at the start drives almost every reporting obligation that follows. We are asked at least once a month whether a new charity should be a trust, a company limited by guarantee, or a Charitable Incorporated Organisation. The honest answer is that it depends on size, activity, and risk appetite, and the SORP applies to all three in slightly different ways.
The Charities SORP in plain English
The SORP is a framework that sits on top of FRS 102 (or the smaller FRS 102 1A regime). It tells trustees how to recognise income, how to split expenditure between charitable activities and support costs, and what narrative the Trustees' Annual Report must contain. The current version is the SORP (FRS 102) revised in 2019, and a new edition has been consulted on for periods starting on or after 1 January 2026. Until that lands, the 2019 SORP plus Update Bulletins remains the working document.
Two things surprise new trustees. First, charity income is split into restricted, unrestricted, and endowment funds, and the SoFA (Statement of Financial Activities) must show movements in each. Second, donated goods and services often need to be recognised at fair value, not just cash receipts. This matters for charity shops, food banks, and charities that rely heavily on pro bono professional support.
Trust, company, or CIO: how to choose
A charitable trust is the oldest form. Trustees hold assets personally on trust for the charity's beneficiaries. There is no separate legal entity, which means trustees can be personally liable for contracts and debts. Trusts suit grant-making bodies with no employees and no premises.
A charitable company is a company limited by guarantee with charitable objects. It files with both Companies House and the Charity Commission, which means two sets of obligations and two filings. The advantage is limited liability for trustees acting as directors, and a legal personality that can sign leases and employ staff.
A Charitable Incorporated Organisation (CIO) was introduced under the Charities Act 2011 to give charities a single regulator. CIOs file only with the Charity Commission. There are two types: the Association CIO (with voting members separate from trustees) and the Foundation CIO (where the members are the trustees). Both give limited liability without the Companies House overhead.
Accounts thresholds that drive everything
Whether you prepare receipts and payments accounts or full accruals accounts depends on income and legal form. Non-company charities with gross income at or below GBP 250,000 can prepare receipts and payments accounts. Above that threshold, and for all charitable companies and CIOs regardless of size, accruals accounts under the SORP are required.
The audit threshold is gross income above GBP 1 million, or above GBP 250,000 where gross assets exceed GBP 3.26 million. Below audit, an independent examination is usually required if income exceeds GBP 25,000. Trustees who miss these thresholds expose the charity to Charity Commission action and can trigger qualified examiner reports that flag governance concerns to funders.
Trustees' Annual Report: not a formality
The SORP requires a Trustees' Annual Report covering aims, achievements, public benefit, financial review, plans, structure, and governance. Larger charities must include a reserves policy, a risk statement, and details of how trustees are appointed and trained. We see many small charities treating this as a copy-paste exercise from prior years. The Charity Commission has signalled that public benefit and reserves disclosures will receive more scrutiny in coming reviews.
How PushDigits supports charities
We act for charitable trusts, companies, and CIOs across London. Our annual accounts team prepares SORP-compliant accounts and independent examinations, while our business advisory team helps trustees stress-test reserves policies and design fund structures that funders accept. Many of our clients started life as informal community groups and we have walked them through registration, governance, and growth.
If you are forming a new charity or your trustees are unsure whether your current accounts meet SORP standards, book a charity governance review or visit our contact page. The right form on day one saves years of restructuring later.