The Charities Act 2006 (CA06) was passed by parliament back in November 2006 and, while some of its provisions came into effect in February 2007, more come into effect this year. The Act principally affects charities in England and Wales and has been welcomed by the Charity Commission, the regulator of the English and Welsh charity sector, as it aims to help reduce some of the bureaucracy that charities face.
There have been four commencement orders issued to date, which bring the sections of CA06 into force. One particular area of interest is the levels at which charities face external scrutiny, either as an audit or an examination, as these have now been increased.
The new thresholds
There are now similar thresholds for charities that are limited companies and those that are not.
Broadly, if a charity has an annual income of less than £500,000 it will not be required to have an audit. This will specifically depend on whether the charity is a limited company or not, on levels of assets or annual income and whether a charity's governing document requires an audit. There are also specific limits for groups. Of course, an audit can be requested where a charity considers that the external scrutiny that this brings is beneficial.
Accounting regulations for charities were changed in Scotland from April 2006. From an external scrutiny perspective, while differences remain, the legislative requirements applying in the two regimes are now much closer.
If you are a trustee of a small charity we would be pleased to discuss these changes in more detail with you.
Companies Act 2006 - the next stage
The ongoing implementation of the Companies Act 2006 (the Act) continues and one of the key implementation dates, 6 April 2008, has now passed. This important date saw the sections of the new Act that relate to accounts and reports and audit come into force and some of the practical changes are highlighted below.
Size matters!
The financial limits that determine whether a company or group qualifies as small or medium-sized have been increased for accounting periods beginning on or after 6 April 2008.
Individual company limits
Small company limits
Medium−sized company limits
Turnover not more than
£6.5m (£5.6m)
£25.9m (£22.8m)
Balance sheet total not more than
£3.26m (£2.8m)
£12.9m (£11.4m)
Number of employees not more than
50 (50)
250 (250)
The limits are important as they determine whether a company can benefit from the preparation of simpler accounts, file abbreviated accounts on the public record at Companies House and qualify for audit exemption.
The group question
The new Act removes the exemption from the preparation of medium-sized group accounts, so the new higher limits shown below are particularly important for those affected.
Group limits
Small group limits
Medium−sized group limits
Net turnover not more than
£6.5m (£5.6m)
£25.9m (£22.8m)
Gross turnover not more than
£7.8m (£6.72m)
£31.1m (£27.36m)
Net balance sheet total not more than
£3.26m (£2.8m)
£12.9m (£11.4m)
Gross balance sheet total not more than
£3.9m (£3.36m)
£15.5m (£13.68m)
Number of employees not more than
50 (50)
250 (250)
Please contact us at an early stage if you think that these new limits will affect your company.
Shorter filing periods
The new Act also shortens the filing deadline to nine months from the year end for private companies (previously ten months) and to six months for public companies (previously seven months). These changes are effective for accounting periods beginning on or after 6 April 2008. That will be April 2009 year ends and onwards for most.
Higher late filing penalties
Proposals to increase the penalties associated with late filing of accounts at Companies House have also been finalised.
Length of delay, measured from the date the accounts are due:
Private company
Public company
Current
New
Current
New
Up to 1 month
£100
£150
£500
£750
1 to 3 months
£100
£375
£500
£1,500
3 to 6 months
£250
£750
£1,000
£3,000
6 to 12 months
£500
£1,500
£2,000
£7,500
More than 12 months
£1,000
£1,500
£5,000
£7,500
The increases will be introduced from 1 February 2009. Where accounts are filed under the new Act, the penalties will be doubled for late filing in two successive years.
The future of the company secretary
From 6 April 2008 private companies are no longer required to have a company secretary, although they may continue to have one if they wish. There are a number of practical considerations associated with this decision, as many of the tasks that the company secretary traditionally performed remain.
You should review your company's Articles of Association to establish whether the wording requires you to have a company secretary. If you do decide to remove your company secretary, you may need to make changes to the Articles and form 288b will need to be filed at Companies House.
If you would like to discuss how any of these changes might affect your company in more detail please contact us.
Members: DJ Thompson FCA DC Hall FCA GJ Miller FCA BC Thomas P Storey FCCA. RHK Business Advisers LLP is registered in England as a Limited Liability Partnership No. OC308294. Registered to carry on audit work by the Institute of Chartered Accountants in England and Wales.
