- This article was corrected on 17 November 2010 - see final paragraph
Small incorporated charities will not have to file their company tax returns online using a new software system after all, HM Revenue & Customs has announced.
HMRC had previously said that all companies, including 30,000 incorporated charities and trading subsidiaries, would have to submit annual accounts using a software system known as iXBRL.
In new guidance published last week, HMRC admitted that the accounting principles used by charities meant they would find it difficult to use the free software that exists for small businesses, and said it would therefore accept accounts in PDF format for charities with annual incomes of less than £6.5m.
"This will provide a respite for smaller organisations," said Katherine Smith, policy officer at the CFDG. "However, a lot of our members will still be caught by this and will still have to work out how to file accounts using this format.
"This will create a lot of extra time and effort, particularly during the first year."
She said the free software did not tally with the Statement of Recommended Practice that governs charity accounting, so charities were likely to have to amend their accounts to file them with HMRC.
She added that the CFDG expected HMRC to create free software that small charities could use.
- The exemption that charities have been given is transitional until alternative free reporting software is available from HMRC.