The Scottish Government recently announced that it will finally be changing the Scottish charity audit threshold to bring it line with England and Wales.
The new threshold is set to mean that only charities with a gross income of £1 million will face mandatory audits.
If you run a charity, this could make a big difference.
What was the old charity audit threshold?
Ever since the Charities Accounts (Scotland) Regulations 2006 were first implemented, Scottish charities have faced an audit threshold of £500,000.
While this may have been quite generous at the time, the threshold has remained unchanged ever since.
In the past two decades, inflation has caused more and more charities to be pushed over the threshold in a process known as fiscal drag.
This has resulted in charities facing audits even when they do not have particularly complex finances.
Now, around one in ten Scottish charities currently face audits.
Ever since 2015, the threshold for English charities was moved to £1 million, so Scottish charities have faced unfair scrutiny for the past decade.
When will the threshold change?
As of yet, there is no confirmation as to when the threshold will change.
Given the timing of the announcement, it can be assumed that the change will take place in 2026.
Whether this will be at the start of the calendar year or the tax year is unknown, but it would make sense for the increase to apply to periods beginning on or after 1 January 2026.
This would mirror similar changes that were brought about by previous review amendments.
However, merely changing the threshold once and then letting it remain static will not solve the greater issue.
There are already calls in England and Wales to increase the threshold again, considering it has remained the same for a decade, so Scottish charities may end up disadvantaged again.
To avoid fiscal drag, the charity audit threshold needs to be reevaluated every few years to ensure that inflation has not placed charities into the range of an audit that could function without one.
Regardless of what the charity audit threshold is, a voluntary audit can be a good way of organising finances and checking on the fiscal health of an organisation.
Any charities that are set to be below the audit threshold could still get voluntary audits, but will benefit from engaging with the service on their terms.
If you run a charity in Scotland and still require an audit, we can help.
Whatever side of the audit threshold your charity is, come and speak to our team to see how we can help you manage your money so that you can do more good with it.
