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Charities Act 2006

Commentary on Sections

Section 32: Annual audit or examination of accounts of charitable companies

127.The provisions in this section relate specifically to the audit thresholds for charitable companies. The revised thresholds will ensure greater consistency in the audit thresholds for charitable companies and unincorporated charities. The provisions in this section amend sections 249A and 249B of the Companies Act 1985 and have been developed in conjunction with the Department of Trade and Industry.

128.Subsection (1) amends section 249A(4) of the Companies Act 1985. Section 249A(4) of the 1985 Act provides for the circumstances in which a charitable company may have a reporting accountant's report rather than an audit. Currently charitable companies with incomes between £90,000 and £250,000 per annum (section 249A(4)(b) of the 1985 Act) and assets of less than £1.4 million (section 249A(4)(c) of the 1985 Act) may have a reporting accountant’s report. Paragraphs (a) and (b) of subsection (1) respectively increase the reporting accountant conditions so that charitable companies with gross incomes of more than £90,000 but not more than £500,000 and those with assets of not more than £2.8 million would be able to have a reporting accountant's report as opposed to an audit.

129.Subsection (2) provides for the associated increase in the audit exemption threshold where a charitable company is a parent company or subsidiary undertaking. Section 249B(1C) of the Companies Act 1985 provides that, where a charitable company is a parent company or subsidiary undertaking, an audit exemption for a particular year is available if in that year the group turnover is not more than £350,000 net (£420,000 gross). The charitable group threshold is 40% higher than that for the individual charitable company threshold. For that reason subsection (2) provides that the new threshold for audit exemption for charitable groups is 40% higher than the new threshold for charitable companies individually. The new threshold is therefore £700,000 net or £840,000 gross.

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