Tax and accounting developments
Accounting practice and tax treatment in non profit financial reporting has seen some changes in the various pieces of guidance and forms issued by the regulatory bodies which raise some important issues for year-end procedures
- Public benefit entities. The Accounting Standards Board (ASB) published its Interpretation for Public Benefit Entities of the Statement of Principles for Financial Reporting in June 2007 (following on from the original Exposure Draft (ED) back in 2005). The Interpretation explains how the Principles in the Statement apply for Public Benefit Entities and makes the point that as the Statement is almost ten years old, this Interpretation may get superseded again in the short to medium term. It provides particular guidance on the treatment of liabilities for commitments to provide public benefit[i].
- Corporation tax in higher education. The British Universities Finance Director Group (BUFDG) has updated its Corporation Tax Guidelines. The new rules apply to the 2006/7 financial year and are an important consideration for auditors and audit committees in the forthcoming year-end process. However, each University should use its own judgement when assessing its own position and the working document is still under ‘close review’ from HM Revenue and Customs (HMRC)[ii].
- Financial reporting in higher education. The new Statement of Recommended Practice (SORP) for accounting in Further and Higher Education took effect from 1 August 2007 reflecting changes in recent Statements of Standard Accounting Practices (SSAPs) and Financial Reporting Standards (FRSs). This updates the previous 2003 SORP. It should be adopted for accounting periods ending 31 July 2008 and earlier adoption is advised.
- Registered Social Landlords. HMRC finalised the draft RSL forms on 16 October to be used by charitable RSLs who want an opinion about whether certain transactions will be subject to Corporation tax[iii].
It remains to be seen whether or not the Gift Aid procedures will change – the proposal from CFDG with other third sector professional bodies for a simpler system met with predictable opposition from CAF. See Ernese Skinner's CFDG update in this issue.
See also Pesh Framjee's article on Income recognition principles in charity financial reporting