Digital accounts are the way forward, says Charity Commission

The Charity Commission has launched a new initiative to encourage charities to digitise their accounts.

This month saw the launch of the new ‘taxonomy’ for charities by the Charity Commission, the independent regulator of charities, and the Financial Reporting Council.

At its launch, the Charity Commission hailed the taxonomy as the ‘pre-requisite’ for charities that choose to file their accounts digitally with both Companies House and the Commission.

The new taxonomy for charities reporting under the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) is essential guidance for charities wishing to file their accounts online with Companies House and the Commission.

It acts as a digital data dictionary that defines the computer-readable tags that identify individual items of data in charity reports and accounts for electronic filing and other analytical purposes.

More than 70 per cent of companies file digital accounts with Companies House, but up to now this has not been an option for charities.

Both the Commission and Companies House are actively evaluating digital filing with the intention of enabling this option for charitable companies and thereby making accounts filing quicker and easier for charities.

In addition anyone using digital accounts will be able to extract the tagged reporting and accounting information that they want and analyse it more efficiently.

Those charities filing tax returns with HMRC will also benefit from having the option of digital filing when submitting supporting accounting information.

Nigel Davies, Head of Accountancy Services at the Commission said: “The taxonomy is a fruit of our investment in this technology and our effective joint working with the FRC. With 35,000 charities having to file their accounts with us and Companies House it made sense to open the door to digital filing as an option for charities.

“In going forward, we are very interested in understanding more about both the demand from users of charity reports and accounts for digital data, and the appetite the sector has for making digital filing a reality.”

Charities will still have the option to file accounts by PDF, but the Commission has noted the popularity of digital filing by companies with Companies House and wishes charities to benefit from this option as well.

The Commission is evaluating the potential benefits of enabling its own digital filing option for charity accounts and anticipates announcing its plans later this year.  In the interim, the Commission can currently accept digital (iXBRL) accounts for display, but has no capability to make use of the data.

Digital accounts have become ubiquitous among the majority of businesses in the UK and yet many charities still rely upon ‘pen and paper’ techniques to manage their affairs.

At Nicklin, we provide a range of accounting services.

Posted in Charity News.