Charity technical briefings

SORP Information Sheet 2

Information Sheet 2 published in January 2019 focusses on the changes in respect of the accounting for gift aid payments made by a subsidiary to a parent charity where no legal obligation exists. It provides support and examples for charities to implement those changes made to FRS 102 through the Triennial Review 2017 and the consequential changes to the SORP through SORP Bulletin 2.

The guidance is written primarily for the subsidiary entities of a charitable parent that applies FRS102. In summary, the impact of the changes on the subsidiary were that:

  • A gift aid payment, intended to be made after the year end, could not be recognised at the balance sheet date where there was no legal obligation.
  • Gift aid tax relief could be recognised at the balance sheet date, even where there was no legal obligation or liability for the gift aid payment, when the conditions were met and it was probable that the gift aid payment would be made.
  • No current or deferred tax liability is recognised by the subsidiary in relation to a gift aid payment where the tax charge and corresponding relief effectively net off, resulting in a nil tax charge.
  • Tax effects may still need to be recognised where for example the subsidiary does not intend to distribute all its taxable profits (current tax effect) or has an anticipated capital gain as a result of the revaluation of items in property, plant and equipment (deferred tax effect).
  • Where the application of the amendments changes the entity’s accounting policy for expected gift aid payments and/or the related tax relief, and they are material, then a prior period adjustment will be required.
Charities Alert: SORP Information Sheet 2
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