March 1, 2011

Online Filing of Accounts – New Rules: Special Rules for Smaller Charities

With effect from 1 April 2011, new rules require all companies and organisations liable to Corporation Tax to file their Company Tax Return, accounts and computations online for any accounting period ending after 31 March 2010. This includes any charities required to file a Company Tax Return.

This would represent a significant burden for smaller charities. HM Revenue & Customs (‘HMRC’) has recognised that the accounting principles by which smaller charities prepare accounts mean that the accounts template included in the free software provided by HMRC may not be suitable for them. Until HMRC provides free software that is suitable for smaller charities, HMRC will continue to accept accounts from smaller charities in PDF format. Computations must be filed in iXBRL format but the free HMRC software should be suitable for these.

A ‘smaller charity’ is defined for these purposes as one where, together with any wholly owned subsidiaries, the combined income does not exceed £6.5 million for the accounting period.

Charities with a combined income above £6.5 million will, in almost all circumstances, need to use commercially available software to file their Company Tax Return, their accounts and any computations in iXBRL format.

Unincorporated associations and charities that are incorporated, for example by guarantee or shares, or in future are incorporated under the Charities Act, are required to submit computations in iXBRL format, but can continue to submit accounts as a PDF or in iXBRL format.

Subsidiary companies of charities are required to submit returns online with accounts and computations in iXBRL format.

All computations forming part of a Company Tax Return must be in iXBRL. However no computation is required where the Company Tax Return supplementary page CT600E is completed and confirms that all income and gains of the charity are exempt from tax and have been or will be applied for charitable purposes. These charities should attach a letter as a PDF file to their online return stating that no computation is required.

Charitable trusts are not affected by this announcement. This is because charitable trusts are liable to Income Tax and make tax returns, if required, under Income Tax Self-Assessment.

Elysian Associates
November 2010

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