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Accounting requirements for Independent churches

These are the key terms and legal requirements relating to submitting your accounts to the Charity Commission.

Accounting requirements for Independent churches primary image

The tables below summarise the legal requirements that apply. Churches affiliated to FIEC are not required to send annual accounts to FIEC. To make sense of the tables you need to know the following terms:

A Charitable Incorporated Organisation (or CIO) is a new form of legal structure for charities. It is not a limited company but has many of the benefits of limited companies.

An Excepted Charity means a charity that is not required to register with the Charity Commission. Your church will be an excepted charity if it is not a CIO and…

1. it is affiliated to FIEC and its income is less than £100,000,

or

2. it is not affiliated to FIEC and its income is less than £5,000.

A Registered Charity means a charity that is registered with the Charity Commission. All CIOs are registered charities. If your church is not a CIO it still needs to register with the Charity Commission if…

1. it is established for wholly charitable purposes

and

2. its income a) exceeds £100,000 (even if it is affiliated to FIEC) or b) exceeds £5,000 and is not affiliated to the FIEC or other relevant umbrella body.

The tables below apply for financial years ending on or after 31 March 2015. For financial years ending before that date but after 31 March 2009, the references to £1m should be read as references to £500,000.

Excepted Charities

  Produce accounts in accordance with statutory requirements and make them available to the public on request* External scrutiny of accounts Annual Report Documents to send to Charity Commission
Income not exceeding £25k Yes – accounts only need to be prepared using payments and receipts method. No external scrutiny needed unless required under the church’s constitution or rules. Not required None unless specifically requested
Income exceeding £25k but not exceeding £100k Yes – accounts only need to be prepared using payments and receipts method. Independent examination required. A full audit is not required unless the church’s constitution or rules require it.

See here for guidance on independent examinations.
Not required None unless specifically requested

Registered Charities (including CIOs but excluding charitable companies)

  Produce accounts in accordance with statutory requirements and make them available to the public on request* External scrutiny of accounts Annual Report Documents to send to Charity Commission
Income not exceeding £25k Yes – accounts only need to be prepared using payments and receipts method. No external scrutiny needed unless required under the church’s constitution or rules. Simplified annual report required. See here at section 7 for more details. Except for CIOs:

a. Do not send accounts or Annual Report

b. If income is £10k or less, complete relevant parts of online Annual Return.

c. If income is greater than £10k complete online Annual Return.

CIOs are required to complete an online Annual Return and to submit their Annual Report and Accounts, regardless of income.
Income exceeding £25k but not exceeding £250k Yes – accounts only need to be prepared using payments and receipts method. Independent examination required. A full audit is not required unless the church’s constitution or rules require it. As above Complete Annual Return and also send Annual Report and Accounts.
Income exceeding £250k but not exceeding £1m and total assets less than £3.26m Yes – accounts must be prepared on an accruals basis in accordance with the applicable SORP. As above and the independent examiner must be from a specified body. See here for further details at section 4. As above As above
(a) Income exceeding £1m or (b) income exceeding £250k and assets greater than £3.26m Yes – accounts must be prepared on an accruals basis in accordance with the applicable SORP. Full statutory audit by a registered auditor required. A full Annual Report must be prepared. As above and if income exceeds £1m a Summary Information Form must also be supplied (including CIOs).

Charitable Companies that are not excepted

  Produce accounts in accordance with statutory requirements and make them available to the public on request* External scrutiny of accounts Annual Report Documents to send to Charity Commission Documents to send to Companies House
Income not exceeding £25k Yes -  accounts must be prepared under company law on an accruals basis in accordance with the applicable SORP. No external scrutiny needed unless required under the church’s constitution or rules.

Must produce statement saying that company is exempt from Companies Act audit.
Simplified annual report required. See here at section 7 for more details.

N.B. Under Company law, the directors have to prepare a Directors’ Report to accompany the accounts in accordance with company law. In practice, the Directors’ Report required by company law and the Annual Report required by charity law are written as one document.
Do not send accounts or Annual Report.

If income is £10k or less, complete relevant sections of online Annual Return.

If income is greater than £10k complete online Annual Return.
See this guidance from Companies House.
Income exceeding £25k but not exceeding £250k Yes - accounts must be prepared under company law on an accruals basis and follow the recommendations of the SORP. Independent examination required.  A full audit is not required unless the church’s constitution or rules require it.

Must produce statement saying that company is exempt from Companies Act audit.
As above Complete Annual Return and also send Annual Report and Accounts. See this guidance from Companies House.
Income exceeding £250k but not exceeding £1m and total assets less than £3.26m Yes - accounts must be prepared under company law on an accruals basis and follow the recommendations of the SORP. As above and the independent examiner must be from a specified body. See here for further details at section 4.

Must produce statement saying that company is exempt from Companies Act audit.
As above As above See this guidance from Companies House.
(a) Income exceeding £1m or (b) income exceeding £250k and assets greater than £3.26m Yes - accounts must be prepared under company law on an accruals basis and follow the recommendations of the SORP. Full statutory audit by a registered auditor required. A full Annual Report must be prepared. As above and if income exceeds £1m a Summary Information Form must also be supplied. See this guidance from Companies House.
  • *See here to download a template for preparing accounts based on payments and receipts method. This also links to a template Annual Report and a template for independent examination report.
  • *See here for a template based on accruals method. This also links to a template Annual Report and a template for independent examination report. Please note that the template here may not have been updated to take account of the most recent SORP available for companies. See more information here about which SORP your charity is permitted to use.
Footnotes

Originally published on 13/03/12 and last updated 04/12/15.

This article reflects FIEC Ltd’s understanding on the date above. It is designed for the purpose of knowledge sharing and does not constitute legal advice.

FIEC Practical Services is the trading name of The Fellowship of Independent Evangelical Churches Limited (FIEC Ltd.). FIEC Ltd. is a Registered Charity in England and Wales No. 251395, a Company incorporated in England No. 225717, and a Charity Registered in Scotland SC039913.

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