Accounting for UK charities (Charity SORP)
The Charity SORP under FRS 102: SOFA, fund accounting, audit thresholds and trustees' report.
The Charities SORP (FRS 102) is the Statement of Recommended Practice that all UK charities preparing accruals accounts must follow. It sits on top of FRS 102 and adapts the framework for restricted funds, donated income and the Statement of Financial Activities (SOFA) instead of a profit and loss account.
Who applies the SORP
Most charities preparing accruals accounts apply the SORP. The exception is very small charities preparing receipts and payments accounts.
| Charity income | Accounts type | SORP applies |
|---|---|---|
| Up to £250,000 (non-company) | Receipts and payments | No |
| £250,000 to £500,000 | Accruals (independent examination) | Yes |
| £500,000 to £1m | Accruals (examination by qualified person) | Yes |
| £1m+ or assets > £3.26m | Accruals (full audit) | Yes |
| Charitable companies (any size) | Accruals (Companies Act + SORP) | Yes |
Independent examination thresholds differ slightly for the OSCR (Scotland) and CCNI (Northern Ireland) — check your regulator.
The Statement of Financial Activities
The SOFA is the SORP equivalent of the P&L, organised around fund types and activity, not just nature.
| Column | Funds tracked |
|---|---|
| Unrestricted | General reserves freely available |
| Restricted | Donor-imposed purpose constraints |
| Endowment (permanent / expendable) | Capital that must be retained |
| Total this year | Sum across funds |
| Total prior year | Comparative |
Income and expenditure are then split by activity — donations and legacies, charitable activities, trading, investments, and so on.
Trustees’ Annual Report
The Trustees’ Annual Report (TAR) is the narrative document that accompanies the accounts. It must explain how the charity’s activities deliver public benefit.
- Mission, objectives and activities
- Achievements and performance
- Financial review including reserves policy
- Plans for future periods
- Structure, governance and management
- Reference and administrative details
- Statement of trustees’ responsibilities
Reserves policy is closely scrutinised by the Charity Commission and donors alike.
Common issues
| Issue | What to do |
|---|---|
| Restricted income with no matching expenditure | Carry forward as restricted reserve |
| Gifts in kind | Recognise at fair value if quantifiable |
| Volunteers’ time | Disclose narratively only, not in SOFA |
| Pension scheme triennial valuation | Update FRS 102 multi-employer disclosures |
| Trading subsidiary results | Consolidate from £1m group income |
Closing thoughts
The SORP is detailed but well-supported by published guidance and example accounts. Pair this with our FRS 102 for UK SMEs article, the Companies House annual accounts guide, and the year-end checklist . The official Charities SORP microsite hosts the full text. See pricing for fund accounting software with SORP-ready reporting.