Finance News: Government advises charitable companies to stay in the Sorp

Mathew Little

The Government does not want charitable companies to opt out of compliance with the Sorp.

An EU directive had been expected to allow charities that are also registered as companies to adopt International Accounting Standards, rather than those laid down by the Charity Commission, from 2005.

But a Department for Trade and Industry consultation is proposing that "charity companies are required to continue to prepare their accounts in accordance with the UK's generally accepted accounting practice". However, companies and building societies will still be able to switch to the international standards.

More than 20,000 charities are also registered with Companies House.

Dual registration enables them to benefit from the limited liability enjoyed by company directors and to hold property directly rather than indirectly through individual trustees.

It was thought that international charities with offices in many different countries might have adopted the international standards in order to have a uniform way of presenting their accounts.

The Charity Commission was known to oppose the idea. Ray Jones, the commission's accountancy policy adviser said: "Both the Charity Commission and the Charity Finance Directors' Group have a unity of approach on this. We both want to maintain the Sorp."

He added: "This isn't a dismissal of the International Accounting Standards. We are going to get harmonisation with UK practice in two or three years but we want to keep the Sorp as well.

"We want to get to the same place as Europe. We just don't want to jump feet-first."

He said that, had charitable companies been able to opt out of the Sorp, this would have meant "the fragmentation of the accounting regime, and that's the last thing anyone wants".

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