Extra burden of filing accounts digitally would be significant for sector, says accountancy firm

Responding to a consultation on plans to allow charities to file digitally, RSM UK queries the benefits of using a new taxonomy

Accounting: plans to allow online filing
Accounting: plans to allow online filing

A proposal for charities to file digital accounts with the Charity Commission and Companies House would put "a significant extra burden on the sector", according to the accountancy firm RSM UK.

A two-month consultation by the commission and the Financial Reporting Council on introducing the iXBRL charity accounts taxonomy, or classification system, closed on 8 December.

It asked technical questions about computer-readable tags that can identify pieces of financial data in accounts, as part of moves to allow charities to file digital accounts with the commission and Companies House.

The consultation said allowing charities that must file accounts with the regulator and Companies House to do so digitally would make the process "easier and quicker".

It said that anyone using digital accounts could extract information and analyse it more efficiently, and charities filing tax returns to HM Revenue & Customs would benefit from having the option of digital filing when submitting supporting accounting information.

RSM’s response to the consultation says that a "significant extra administrative burden" would be incurred by charities and queried the benefits for charities of using the new taxonomy.

It says the extent of the administrative burden would depend on the complexity of charities’ activity-based reporting.

Nick Sladden, head of charities at RSM UK Audit LLP, told Third Sector that the company’s experience in tagging accounts for charities to meet HMRC requirements showed the new taxonomy "generally involves more time, and therefore resource, than the equivalent process for commercial companies".

He said this was because of the complexity of disclosure and analysis required by the Statements of Recommended Practice used by charities, compared with those used in the private sector.

Sladden said that digital filing and tagging of accounts would have to be carried out by volunteers, paid finance staff or professional advisers. He concluded that this would have a negative effect on the funding available for charitable activities.

RSM also wants the new taxonomy to be introduced on a staggered basis, with minimum tagging required in the first few years. This is similar to the way in which the iXBRL taxonomy was introduced to the commercial sector.

The consultation said that about 70 per cent of private companies filed digital accounts with Companies House, and that HMRC, Companies House and the Irish Revenue Commissioners were expected to follow the commission and the FRC in adopting the new taxonomy.

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