Third sector backs Government action to cut red tape for one in five charities

News Release

CAB/089/08 - 28 August 2008

Phil Hope, Minister for the Third Sector, today set out how the Government will cut red tape for one in five charities, through measures that have been well supported by the third sector.

The Office of the Third Sector in the Cabinet Office published the Government’s plans to raise the minimum income thresholds above which charities face more onerous reporting requirements – reducing the regulatory burden on many small charities while maintaining an effective regulatory framework.

An estimated 20%, or 33,000, registered charities are expected to benefit from a reduced regulatory burden under recommendations that will be implemented for the financial year 2009/2010.

The plans appear in the Government’s formal response to its consultation on this subject, conducted jointly with the Charity Commission. The document includes the outcomes of the consultation, which demonstrate overwhelming support from the sector for the Government’s proposals. 

Key threshold changes include:

• An increase in the threshold above which charities must prepare accruals accounts from £100,000 to £250,000. This will reduce burdens for around 11,700 charities.
• An increase in the threshold above which accounts must undergo external scrutiny from £10,000 to £25,000. Around 37,000 charities will no longer be required to have their accounts externally examined.
• An increase in the threshold from £10,000 to £25,000 for charities to submit annual accounts and the Trustees Annual Report (TAR) to the Charity Commission. This means that around 23,000 small charities will no longer be required to submit their accounts and TAR to the Commission.

Phil Hope, Minister for the Third Sector, said:

“I believe it is important that charities are free to focus as much time as possible on their core purpose which is why I am delighted that these changes will see the administrative burdens of thousands of charities reduced. These changes will be particularly significant for smaller charities that are often at the heart of the communities they serve so every minute saved in form-filling will, I hope, have a measurable difference on those communities.

“However, I also recognise that proper accounting standards are important because people who donate money want to know it is being used properly, but there is a balance to be struck, and I am confident that these changes get that balance right.”

Dame Suzi Leather, Chair of the Charity Commission, said:

“Achieving proportionate regulation is about finding the right balance: focussing on areas of greatest risk and ensuring that public accountability is greatest where the bulk of charitable resource lies. These changes represent another crucial step towards lightening the load for smaller charities whilst targeting the regulatory and accountability focus on larger charitable incomes – those organisations which enjoy most of the public’s donations and most of the Exchequer’s taxation relief.”

The recommendations will be introduced in secondary legislation by the end of the 2008/09 financial year. This will allow the measures to take effect from the beginning of the next financial year.

In total, 58 responses were received from a wide range of charities and other stakeholders representing thousands of charities. The Government’s response to the consultation explains the background to the exercise and provides a summary of responses to the consultation alongside a detailed Government response to specific questions. As a result of the consultation, two proposals will not be taken forward due to convincing arguments that they went too far in terms of the regulatory balance, and could damage sector accountability and transparency.

Note to editors

1. The Government’s response to the consultation can be viewed on the Charity Commission website 'Government Response - Financial Thresholds in the Charities Acts – Proposals for Change (PDF)' or at: http://www.cabinetoffice.gov.uk/third_sector.

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