Why small charities may increasingly switch to R+P accounts

At the same time, updates to the Charities SORP have introduced additional technical complexity, particularly in areas such as lease accounting. For smaller organisations with limited resources, trustees and their advisers are increasingly questioning whether the benefits of accruals accounting justify the cost and effort involved. Against this backdrop, R+P accounts offer a simpler and more cost-effective alternative that may better align with the needs of many small charities.

In our recent webinar SORP 2026: time to switch to Receipts & Payments accounts, Siobhan Holmes and John Howard from Azets explained the key considerations. With nearly a thousand webinar delegates and over a hundred questions from the audience, it’s clear that interest in well-constructed R+P accounts is on the rise.

R+P accounts are a cash-based method of accounting. They record only the cash received and paid during the financial year, without adjustments for accruals, prepayments, depreciation or other non-cash items. Despite their simplicity, these accounts are still a statutory form of reporting and must comply with charity law and regulatory guidance. They typically include a trustees’ annual report, a statement of receipts and payments, and a statement of assets and liabilities. While detailed notes are not always required (except for Charitable Incorporated Organisations), including additional disclosures is often considered best practice.

Eligibility:

• In England and Wales, non-company charities (including unincorporated charities and CIOs) with gross income below £500,000 can use R+P accounts for financial years ending on and after 30 September 2026. If the charity’s financial year ends before 30 September, the current threshold of £250,000 applies.
• In Scotland and Northern Ireland, the threshold remains £250,000.
• The charity’s governing document must not prohibit the use of R+P accounts.
• Trustees must agree that this basis is appropriate.
• Importantly, eligibility does not automatically mean suitability. For example, some funders may still require accruals accounts.

This means that while a large proportion of charities of non-company charities in England and Wales will be eligible, a considered decision is still required.

For many small charities, the main advantage of R+P accounts is simplicity. Preparing accruals accounts under the Charities SORP can be time-consuming and technically demanding, particularly where there are limited finance resources or reliance on volunteers. A cash-based approach reduces this burden significantly.

Lower preparation and compliance costs are another key benefit. By avoiding the detailed requirements of the SORP, charities can reduce professional fees and internal time spent on year-end reporting. This can be particularly valuable where funds are limited and need to be directed towards charitable activities.

R+P accounts can also be easier for trustees to understand. Many trustees are not financially trained, and accruals concepts such as deferred income or depreciation can be difficult to comprehend. A cash-based format can help trustees to focus on cash flow and short-term financial management. For charities where day-to-day operations are largely cash-driven and relatively straightforward, this can be a more proportionate approach.

While R+P accounts offer clear advantages, they are not suitable for all charities. One of the main limitations is that they do not present a true picture of the charity’s financial position. Liabilities, commitments and timing differences are not reflected, which can make it harder to assess long-term sustainability.

There may also be external expectations to consider. Funders, lenders or other stakeholders may require accruals-based information, even if the charity is technically eligible to use R+P accounts. In these cases, switching frameworks could create additional reporting challenges rather than reduce them. Because of these limitations, the trustees’ annual report becomes particularly important. Clear narrative reporting is needed to explain the charity’s activities, financial position, risks and use of funds. This helps to bridge the information gap created by the simpler accounting format and maintain transparency.

For charities considering a move from accruals to R+P accounts, a planned approach is essential. Trustees should first review the governing document and formally approve the change. They will also need to ensure that the opening cash position is clearly understood and reconciled.

Existing accruals balances, such as prepayments, accruals and deferred income, must be removed as part of the transition. Clear communication with stakeholders is also important, so that users of the accounts understand the change in basis and its implications. Ultimately, the decision should be guided by whether the new approach supports good governance and decision-making.

Our on-demand webinar SORP 2026: time to switch to Receipts & Payments accounts, provides a practical overview of eligibility, advantages and transition considerations for receipts and payments accounts.

In addition, accountants should refer to guidance issued by the relevant charity regulator for their jurisdiction. In England and Wales, this includes resources from the Charity Commission for England and Wales (such as the CC16 receipts and payments accounts pack). In Scotland, guidance is provided by the Office of the Scottish Charity Regulator, and in Northern Ireland by the Charity Commission for Northern Ireland.