Our previous article, Charities SORP 2026: key points from the live consultation, highlighted the main changes to charity accounting contained within the SORP exposure draft. While the consultation spans a wide range of technical issues, one core question stands out: does the proposed SORP genuinely reflect the needs and realities of small charities?

Many small charities find the SORP reporting requirements complex. The consultation explores whether the £500,000 threshold for Tier 1 remains appropriate. With the DCMS consultation on financial thresholds potentially resulting in an increase to the threshold for receipts and payments accounting to £400,000 (for non-company charities), many charity representatives are wondering if Tier 1 should be extended to £1m. Please share your views on the three proposed tiers with us.

Receipts and payments (R&P) accounting remains a helpful alternative to accruals accounting for small, non-company charities that are eligible to use the cash accounting basis. Raising the threshold from £250,000 to £400,000 may be a welcome step for many charities and we are keen to hear your views to inform our response to the DCMS consultation. You can revisit our webinar, Masterclass in Receipts & Payments Charity Accounts for Preparers and Examiners, to explore whether this may be a better option for your charity (clients). Transitioning from R&P to full accruals accounting under the Charities SORP (FRS 102) remains daunting for many small charities, even with the proposed Tier 1 simplifications. Clearer guidance on the transition to accruals accounts may help to ease this shift.

Following our webinar about the SORP consultation launch, some members have raised concerns about the current treatment of capital grants under SORP, advocating for a move towards an accruals-based approach consistent with FRS 102. They have argued that this would provide greater clarity and negate the need for creating designated funds for relevant capital grants.

Other technical areas some members raised during and after the webinar were:

• Clearer definitions of low-value leases and simplification of lease accounting requirements where leases have a donation element
• More guidance and standardisation for impact and sustainability reporting (especially in Tiers 2 and 3)
• Adjusting the salary banding for remuneration disclosures to reflect inflation
• Updating outdated accounting regulations to eliminate the need for the true and fair override in non-company charities

Please share your views with us and respond to the consultation directly, especially about questions where your context can illustrate challenges or benefits of the proposed changes.

The consultation has prompted strong calls for improved support materials from the charity regulators. For small charities, especially those without dedicated finance teams, the wish list includes:

• A simplified SORP version for Tier 1 charities that clearly shows all the reporting requirements (the “musts”) relating to this tier
• A summary of all the changes in the SORP that provides sufficient detail to understand the impact on financial reporting requirements without the need to read the full document
• Illustrative accounts tailored by tier and charity type
• A charity accounting template (spreadsheet) for Tier 1 charities that fully complies with SORP 2026 requirements
• Compliance checklists and decision trees to clarify disclosure obligations

In our SORP consultation webinar we repeatedly heard that cumbersome new requirements, for example on lease accounting, may discourage potential volunteers from taking on the important treasurer role. Better tools and resources would ease compliance and lower the barriers for trustees and volunteer treasurers.

A certain degree of complexity in charity financial reporting is, by necessity, inherent. The Charities SORP is developed within the framework of FRS 102, the financial reporting standard applicable in the UK and Republic of Ireland, which establishes the core principles of accounting for all entities, including charities. As such, while the SORP provides tailored guidance for the charitable sector, it must remain aligned with the requirements of FRS 102.

In addition, the SORP must comply with the legal and regulatory frameworks set out in law and the associated accounting regulations across the UK’s jurisdictions. These structural constraints mean that there are limits to how far simplification can be taken. However, the key objective remains: to ensure that the SORP interprets and applies these standards in a manner that is proportionate and practical, particularly for smaller charities operating with limited resources.

This consultation is a rare opportunity to influence how small charities are treated within the financial reporting framework. As accountants, your insight is invaluable – whether you're advising local organisations or volunteering as a trustee.

Are the proposed changes proportionate and practical? Would they reduce the compliance burden, or unintentionally increase it? What guidance would make the biggest difference for your clients or organisations?

We welcome your views. Please contact me to discuss any aspect of the consultation or to share feedback on the SORP Exposure Draft and the DCMS consultation of financial thresholds in charity law. To share thoughts about the SORP and DCMS consultation with me, please contact me by email, ideally before 22 May. If you would like to respond formally to the SORP consultation, or read more about the proposed changes, visit the Charities SORP microsite.