Finance: Charities Bill change to call for group accounts

The Government has proposed amending the Charities Bill to force charities to file group or consolidated accounts.

The change means that the financial results of charities and their trading subsidiaries have to be treated as a group rather than individually.

The proposal was first put forward by Labour peer Lord Dubs before the General Election. At the time, ministers said they needed to give the issue further thought - but they have now tabled an amendment on the subject themselves.

On 7 June, Home Office minister Baroness Scotland told the House of Lords that the Government "agreed with the spirit" of Lord Dubs' amendment and would incorporate it into the Charities Bill. The amendment was tabled last week.

The Charity Finance Directors' Group, which had lobbied for the Dubs amendment, said that it was pleased with the Government's decision.

The umbrella body wanted the change because it believed that 'charity-only' accounts could disguise the impact of huge amounts of income from trading subsidiaries. It said income-generating activities could be 'hived down' to a trading company that would not be subject to Charity Commission scrutiny.

However, the move was opposed by Liberal Democrat peer Lord Phillips.

He described it as misconceived. "It forcibly mingles the affairs of a charity and its trading subsidiary, when the Charity Commission advises that the two be kept at arm's length," he said.

Group accounts are already practised by many charities. They are already recommended by the Charities SORP and required by Companies House. But charities do not have to prepare them for their annual return to the Charity Commission.

Baroness Scotland also told peers that all financial thresholds in the Bill will be reviewed one year after Royal Assent is given, to see if they are set at appropriate levels.

This could affect changes to the audit threshold - the Charities Bill raises the threshold below which charity accounts do not have to be professionally audited from an annual income of £250,000 to one of £500,000.

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