The Charity SORP Committee published the 2025 Statement of Recommended Practice (SORP) in October, following extensive consultation. The new SORP introduces several major updates to charity financial reporting, with the most significant changes outlined below.

1. Introduction of a three-tier reporting framework

A new size-based tier system aims to reduce reporting burdens for smaller charities while maintaining transparency.

• Tier 1: Charities with income under £500k
  • Eligible for simplified accruals accounting
  • Reduced disclosure requirements
• Tier 2: Income between £500k and £15m
  • Must comply with all Tier 1 requirements plus additional disclosures
• Tier 3: Income above £15m
  • Must comply with Tiers 1 and 2
  • Plus enhanced narrative reporting on sustainability, governance, and social impact

The structure and naming of tiers were heavily discussed in consultation, with concerns about clarity and appropriateness of income thresholds.

2. Significant updates to key reporting areas

Beyond the tier framework and alignment with FRS 102, the 2025 SORP introduces substantial enhancements:

Fund accounting

• Clearer disclosures on fund nature and purpose
• Improved transparency on:
  • Restrictions
  • Transfers between funds
  • Designated funds
  • Endowments
  • Total return investments

Grant-making disclosures

• Expanded requirements for charities that award grants.

Heritage assets & related party transactions

• Updated guidance for improved clarity and consistency.

Going concern reporting

• Trustees must provide a more explicit assessment of financial sustainability
• Must disclose any material uncertainties affecting going concern

Mandatory impact reporting

• Trustees’ Annual Reports must include evaluation of:
  • Environmental impact
  • Social outcomes
  • Governance (ESG) matters

3. Alignment with FRS 102

The revised SORP includes updates to accounting treatment for:

• Revenue recognition
• Leases

These changes are intended to ensure full consistency with the latest version of FRS 102.

Overall Goal of the 2025 SORP

To enhance:

• Transparency
• Accountability
• Comparability
  across charity financial statements, while reducing unnecessary burden for smaller charities.