The Charities Accounts (Scotland) Amendment Regulations 2025: business and regulatory impact assessment

Section 1: Background, aims and options

Background to policy issue

Broadly speaking, The Charities Accounts (Scotland) Regulations 2006 (the 2006 Regulations) set out the requirements on the preparation of accounts for charities registered in Scotland. There have been seven subsequent amending instruments to the 2006 Regulations, which have, among other things, addressed issues with the original drafting and updated references to applicable accounting standards.

The Charities Accounts (Scotland) Amendment Regulations 2025 will be the eighth such amending instrument. It is being introduced for the reasons summarised below.

Audit income threshold

At present, a charity registered in Scotland with an annual income of £500,000 or more must get its accounts audited. A charity with an income less than £500,000 can instead get its accounts independently examined (unless an audit is required for another reason, such as a funding or constitutional requirement). The audit income threshold is set out in the 2006 Regulations and has not changed since 2006.

In recent years there have been arguments for increasing the threshold, most notably in responses to a 2024 consultation on a review of charity regulation and its associated online engagement events. The arguments include:

• a lack of auditor availability
• auditor fees being unaffordable
• enhanced audit standards being disproportionate to charities in the £500,000 to £1 million bracket
• increase in inflation since 2006
• parity with other regimes

These arguments have been gaining prominence among third sector stakeholders, including charities and professional bodies.

Other relevant audit income thresholds across the UK are currently:

• £1 million for charities in England and Wales (increased from £500,000 in 2015). N.b. a recent UK Government consultation on financial thresholds in charity law sought views on increasing the threshold again, and so this could be subject to change
• £500,000 for charities in Northern Ireland
• £15 million for companies (increased from £10.2 million on 6 April 2025)

Fully implementing the Charities (Regulation and Administration) (Scotland) Act 2023

The Charities (Regulation and Administration) (Scotland) Act 2023 (the 2023 Act) is being commenced through three orders:

• The first commencement order came into force on 1 April 2024
• The second commencement order came into force on 30 June 2025
• The third commencement order is planned to come into force in early 2026

To bring forward this final commencement order, the 2006 Regulations require minor consequential amendments related to the publication of charity accounts, in order to accurately reflect changes made by the 2023 Act.

This relates to a dispensation granted by the Scottish Charity Regulator (OSCR) for charity trustees to omit their name from any charity accounts if it is likely that there is a safety or security concern to any person or premises. Additionally, a new ‘safety and security dispensation’ is being introduced. This allows charities to apply to OSCR to omit any other information from their statement of account where its inclusion would likely jeopardise the safety or security of any person or premises, for example those named in related party transactions.

References to accounting standards

A Statement of Recommended Practice (SORP) is a set of sector-driven recommendations on financial reporting, auditing and actuarial practices for specialised industries, sectors or areas of work. It can also supplement accounting standards set by the Financial Reporting Council (FRC).

The latest amending instrument to the 2006 Regulations, The Charities Accounts (Scotland) Amendment Regulations 2019, updated the definition of the Charities SORP to its current edition. This was published in October 2019 and applies to accounting periods beginning on or after 1 January 2019.

The Charities SORP and Further and Higher Education SORP are in the process of being updated, with both due to come into force on 1 January 2026. They will apply to accounting periods beginning on or after that date. This means the 2006 Regulations, as currently amended, will no longer refer to the most recent editions from 2026.

Purpose / aim of action and desired effect

Increasing the audit income threshold

We consulted with key stakeholders including OSCR, accounting bodies and sector representatives to better understand the arguments and any potential unintended consequences of raising the audit income threshold. The Cabinet Secretary for Social Justice then agreed to raise the audit income threshold to £1 million and this was announced on 25 March 2025: Review of charity regulation - Scottish Government consultations - Citizen Space.

For charities, completing an audit is significantly more resource intensive and costly than the process needed to prepare for an independent examination. For firms, audit is highly regulated by comparison to independent examination, and therefore it should be easier for firms to take on an independent examination than an audit. Raising the audit income threshold should help to alleviate administrative burden and reduce costs for relevant charities.

Fully implementing the Charities (Regulation and Administration) (Scotland) Act 2023

Changes in relation to the publication of charity accounts and the names of charity trustees are required to bring forward a third and final commencement order for the 2023 Act. These changes were assessed in the BRIA for the Bill which became the 2023 Act.

At present, OSCR publishes either the principal office of the charity or the name and address of one of the charity trustees. A charity can apply to OSCR to request a dispensation from publishing that information if doing so is likely to jeopardise the safety or security of any person or premises.

The third commencement order will include the publication of all charity accounts as well as the publication of charity trustee names. As a result of that change, the 2023 Act extends that mechanism to all charity trustees, and not just the primary contact or principal office. The 2023 Act also permits, where a dispensation has been granted, that information can also be omitted from a charity’s accounts.

There are requirements for charity accounts in certain circumstances to include information about other people. Additionally, a new ‘safety and security dispensation’ is being introduced. This allows charities to apply to OSCR to omit any other information from their statement of account where its inclusion would likely jeopardise the safety or security of any person or premises, for example those named in related party transactions.

References to accounting standards

Charities require clarity on which edition of the Charities SORP they must follow and from which date.

By including references to the most recent edition of the Charities SORP, charities with an accounting period beginning from 1 January 2026 will understand the rules with which they must comply.

Charities with an accounting period beginning prior to 1 January 2026 will continue to prepare their accounts in accordance with the 2019 edition of the Charities SORP.

Options (considered so far / still open)

Audit income threshold

Option 1: Do nothing

Maintaining the current threshold of £500,000 would result in unnecessary costs for charities whose income, by 2006 terms, would not have met the threshold.

Option 2: Increase threshold

Increasing the threshold to £1 million will help to ease the issues around auditor availability and may reduce costs for charities no longer needing an audit.

Full implementation of the Charities (Regulation and Administration) (Scotland) Act 2023

Option 1: Do nothing

This would prevent the 2023 Act from being fully commenced as the third and final commencement order cannot be laid until changes are made to accounting regulations. This would have a direct negative impact on OSCR as it would be unable to take forward publication of charity accounts and charity trustee names. Both of those proposals were key to the aim of increasing transparency and accountability in charities to ultimately lead to improved public trust and confidence in charities.

Option 2: Fully implement

Taking forward the required changes to accounting regulations will ensure the 2023 Act can be fully implemented.

References to accounting standards

Option 1: Do nothing

The 2006 Regulations specifically reference the SORP which charities must follow and from which date. By not updating the regulations with the new SORP, charities may be unaware of the new requirements and fail to prepare their accounts in accordance with the correct accounting standards.

Option 2: Update references

Updating the references to the Charities SORP to the most recent edition will ensure that charities and the accounting sector are in no doubt as to which accountings standards must be used.

Sectors / Groups affected

Scottish Charity Regulator (OSCR)

OSCR is the independent regulator and registrar for Scottish charities.

They will be responsible for the enforcement of these regulations, as well as providing advice and guidance to charities, auditors and examiners.

Charities / charity trustees

Charity trustees are the people in overall control and management of a charity.

They will be responsible for maintaining financial records and providing accounts that meet the required accounting standards.

Independent Examiners / auditors

Examiners of accounts are the people who must be independent of the charity and conduct a review of the accounts.

They will be responsible for producing a report, attached to the accounts, that highlights any issues to the reader.