New tax reporting regulations 'could cost millions', says Charity Finance Directors' Group

HMRC's corporation tax plans criticised

Charities could incur "astronomical" costs trying to meet the new reporting requirements for a tax they are exempt from paying, the Charity Finance Directors' Group has warned.

A new reporting system for corporation tax being introduced by HM Revenue & Customs in April 2011 will require all companies, including incorporated charities and trading subsidiaries, to submit annual accounts using a technology known as XBRL.

Research by Oxfam suggests the software required could cost between £5,000 and £17,000 for each charity. This could leave the 30,000 incorporated charities that will have to submit returns under the system facing a combined bill of about £150m.

Roger Chester, deputy chair of the CFDG and finance director at Lionheart, the benevolent fund for chartered surveyors, said XBRL had not been developed with charity accounts in mind and the CFDG was forming a specialist interest group to tackle the problem.

"There has been no consultation with the charity sector about how this will work, and it's obvious there are a number of problems," he said. "If they don't fix them, the cost to the sector could be astronomical."

"Our worry is that the software will be expensive and won't be appropriate for charities to use," said Chester. "The system is based on commercial accounts, which use a profit-and-loss accounts system."

He said systems did not seem to have been developed for higher education establishments and housing associations, which have their own statements of recommended practice.

Pesh Framjee, a special adviser for the CFDG and head of the not-for-profit unit at accountants Horwath Clark Whitehill, said HMRC needed to provide a service that charities could use.

"Even if the sector has to pay £1,000 for software, that's still far too much," he said. "That will still cost the sector more than £30m.

"If HMRC requires us to use this system, it must offer a simple, appropriate service that charities can use."



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