UK charity income recognition is governed by Charities SORP (FRS 102), not US accounting standards. Getting the categorisation right at intake saves hours of year-end reconciliation.
- Recognise income when you have entitlement, receipt is probable, and the amount is measurable, the SORP three-part test.
- Split every income stream into the right SORP class at the intake form: donation, fundraising trading income, performance-related grant, or investment.
- Gift Aid is recognised as a separate income line when entitlement arises, and it never applies to ticket price, raffle entries, or auction lots at fair value.
- Multi-year grants are recognised tranche by tranche as each year's conditions are met, not in full at signing.
- Zeffy's separate forms for donations, ticketing, memberships, and peer-to-peer keep the SORP categorisation clean from the moment a gift is captured.
One bank deposit hits your account on a Tuesday. Inside it: a £50 unrestricted recurring gift from a regular donor, £600 in event-ticket revenue from last month's quiz night, a £250 sponsorship with a logo placement on the raffle poster, a £5,000 tranche of a National Lottery Community Fund grant that depends on a beneficiary count you have not hit yet, and £150 of goods in kind from a local supplier "valued at retail". Your job, as the honorary treasurer who is also a trustee holding down a day job, is to record each of those correctly so the year-end accounts reconcile to the penny and the independent examiner (if one ever shows up) does not flag a single line.
That is charity income recognition. It is 80% getting the categorisation right at intake and 20% applying the standard. Get the intake right and the rules largely take care of themselves. Get it wrong and no amount of SORP literacy will save the annual return.
This guide covers the rules in full: the SORP entitlement test, the four income classes, the SORP approach to fundraising event income, donation and grant recognition, the intake decision table, journal entries in £ you can mirror, and the five most common mistakes. Every section also answers the only question a working treasurer has: what do I actually do on Monday?
In this article:
What is charity income recognition, and why treasurers lose sleep over it
Income recognition is the charity accounting rule for when a pound counts as earned income on your books, and under which framework. For a registered charity, the governing standard is Charities SORP (FRS 102), the Statement of Recommended Practice for charities applying UK GAAP under FRS 102. The 2019 edition is the current operative version, with an updated edition effective from 1 January 2026 (Charities SORP microsite).
Under the SORP, the core income-recognition test has three parts: a charity recognises income when all three conditions are met:
- 1. Entitlement, the charity has a legal entitlement to the resources (a signed grant agreement, an unconditional pledge, an online donation completed and processed).
- 2. Probable, it is probable the resources will be received (the donor has not revoked, the grant conditions are on track to be met).
- 3. Measurable, the amount can be measured reliably.
This "entitlement, probable, measurable" triad replaces the exchange-vs-contribution dichotomy used in US GAAP. The categorisation question in a UK charity context is not "exchange or contribution?" but "which SORP income class does this sit in?", because that class determines the recognition point, the fund it lands in, and whether Gift Aid applies.
The five SORP income classes:
- Donations and legacies, unrestricted or restricted gifts where the donor receives nothing of quantifiable value in return. Gift Aid applies to this class.
- Income from charitable activities, income earned in direct pursuit of the charity's objects, including performance-related grants (grants paid on delivery of a service).
- Income from other trading activities, fundraising events, trading subsidiary income, merchandise sales, sponsorship with quantifiable promotional benefit, lottery and raffle ticket sales.
- Investment income, bank interest, dividends, rent from investment properties.
- Other income, disposal of fixed assets, miscellaneous.
Why this matters operationally: misclassifying income at intake propagates everywhere. It changes when income appears on the statement of financial activities (SoFA). It changes whether a balance sits in deferred income or a restricted fund. It changes whether a Gift Aid reclaim is valid. And misclassification is a recurring finding in independent examinations, especially around event sponsorships and grants that look like donations but contain a trading or performance element.
For a small charity: you do not need to memorise the SORP in full. You need one rule applied consistently at the moment money comes in. The rest of this guide is that rule, with the journal entries.
Split income by SORP category at the intake form
This categorisation happens at the intake form, not in the journal entry. If your donation page, ticketing page, and membership page are the same form with different dropdowns, you are setting yourself up for a forensic reconciliation at year end. If they are separate forms, the categorisation is already done before the money lands.
Donation (voluntary income) is a transfer where the donor receives nothing of quantifiable value in return. The public-benefit principle (the public at large benefits from the charity's work) does not count as "commensurate value" to the donor. Fundraising trading income is money received where the payer does receive goods or services of quantifiable value, a ticket, a meal, a raffle entry, a sponsor's logo placement. Performance-related grants are grants that pay on delivery of a specified level of service; the grantor effectively procures the activity.
A critical UK-specific overlay: Gift Aid eligibility follows this split. Gift Aid applies only to donations (voluntary income). It never applies to the ticket price element of a gala ticket, a raffle entry, an auction lot at fair value, or the membership-benefit portion of dues. Getting this wrong means either overclaiming Gift Aid (an HMRC compliance risk) or leaving valid Gift Aid on the table (HMRC, Gift Aid guidance; Charity Tax Group).
The practical takeaway: set up separate intake forms for donations, tickets, shop, and memberships. The SORP category and Gift Aid flag are set the moment the transaction is captured.
Six examples of fundraising trading income
- Selling merchandise through the charity's online shop
- Offering fee-based services
- Paid membership programmes that provide quantifiable benefits (newsletter access, member events, discounts)
- Ticket sales to fundraising events, including quiz nights and gala dinners (the fair market value of the meal is the trading-income component; any amount paid above that is a donation)
- Raffles and auctions where the participant receives a chance to win or an item of value in return
- Sponsorships that include quantifiable promotional benefit (logo on posters, a stand at the event, signage with measurable reach)
Six examples of donations (voluntary income)
- Direct donations through the charity's online donation page
- Foundation and government grants with no performance conditions (recognised as voluntary income when entitlement arises)
- Peer-to-peer campaign gifts where no good or service is exchanged
- Corporate donations and employer matches with no advertising benefit
- Major gifts, legacies, and bequests
- Gifts in kind (goods or services donated; recorded at fair value at the time of receipt)
For a small charity: the donor's intent ("I meant it as a donation") does not control the categorisation. What the donor received controls it. A £50 quiz-night ticket that comes with a £15 supper is £15 of trading income and £35 of donation. Categorise at the form and you will never have to reconstruct that split from a bank statement.
Comparison of SORP income classes
|
| SORP income class | Donations and legacies | Income from other trading activities | Income from charitable activities |
| Recognition point | On entitlement (gift received or pledge made and unconditional) | When the good or service is delivered (event date, item dispatched) | As service is performed / activity delivered |
| Gift Aid eligible? | Yes, on the full amount (subject to donor benefit rules) | No (the donor received goods or services) | No |
| Restricted funds? | Can be restricted or unrestricted (donor specifies) | Unrestricted unless trading surplus is gift-aided back | Typically purpose-restricted to the activity |
| VAT treatment | Outside the scope of VAT | Exempt if fundraising event exemption applies (HMRC Notice 701/1, up to 15 events of the same kind per location per year); standard-rated otherwise. Consult Charity Tax Group / your accountant. | May be within scope depending on structure; consult Charity Tax Group |
| Deferred income? | Only if time-restricted or conditional on an event | Yes, defer until performance obligation delivered | Yes, defer until service performed |
Source: Charities SORP (FRS 102); HMRC, Gift Aid; Charity Tax Group.
Recognise fundraising event income the SORP way
When a transaction involves a ticket sale or event entry, SORP treatment requires you to identify how much of the payment is trading income (the fair value of what the attendee receives) and how much is a donation (any excess above fair value).
Worked example: a £50 gala ticket including a £20 fair-value meal
The ticket price is £50. The fair value of the meal provided is £20. Under Charities SORP:
- £20 (trading income): recognised as income from other trading activities on the night of the event, when the performance obligation (the event) is delivered. This portion is recorded as deferred income from the time of sale until the event date.
- £30 (donation): recognised immediately at the time of ticket purchase as voluntary income, because the donor's entitlement to make a gift exists the moment they pay. If the donor has signed a Gift Aid declaration, the charity can reclaim Gift Aid on the £30 donation element, provided HMRC's donor benefit rules are met.
HMRC donor benefit rules: HMRC sets limits on the value of benefits a donor can receive before the donation element loses Gift Aid eligibility. The rules were simplified in 2019; verify the current benefit thresholds at HMRC, Gift Aid: what donations charities and CASCs can claim on before applying them to any specific event. For most standard gala dinners where the ticket price substantially exceeds the meal value, Gift Aid on the excess is usually available.
VAT on event tickets
A fundraising event that meets the fundraising event exemption (HMRC Notice 701/1) is VAT-exempt. The exemption applies to events organised primarily to raise funds, up to 15 events of the same kind in the same location per tax year. Outside that limit, or for events that do not meet the conditions, tickets may be standard-rated for VAT. If your charity is VAT-registered (or approaching the registration threshold), verify the current exemption conditions with Charity Tax Group or your accountant before selling tickets.
Raffles and lotteries are a separate accounting line
Under the Gambling Act 2005, most charity raffles sold in advance to the public are small society lotteries. These require registration with your local licensing authority (£40 initial fee, £20 annual renewal). Key limits: £20,000 in ticket sales per single draw; at least 20% of proceeds to the cause; maximum single prize £25,000. A raffle where tickets are sold and the draw takes place entirely at a single event is an incidental non-commercial lottery and requires no registration.
For accounting purposes, raffle ticket income is trading income regardless of registration type. Gift Aid never applies to raffle ticket purchases, the buyer receives a chance to win, which is goods or services in return (Gambling Commission, small society lotteries).
For a small charity: the most important annual judgement call for event income is the fair value of what attendees receive. Document it once per event type, keep the calculation on file, and reuse it. That single figure determines the donation split, the Gift Aid eligibility, and the deferred-income balance.
Recognise donations and grants under Charities SORP
Once a transfer is categorised as voluntary income (a donation, an unconditional grant), Charities SORP Module 5 governs when it is recognised. The two classification questions for every donation or grant are: (1) is it conditional or unconditional, and (2) is it restricted or unrestricted? These are independent questions with independent consequences.
Unconditional vs conditional income
An unconditional donation or grant is recognised as income immediately when the entitlement arises, at the point of the online gift, the signed pledge, the award letter from a foundation.
A conditional donation or grant is deferred until the conditions are met. Under Charities SORP, income is conditional when the charity has not yet established entitlement, typically because a specific performance condition must first be satisfied, or because an event must occur before the gift is promised. Deferral sits in a "deferred income" creditor on the balance sheet until conditions are met.
Restricted funds vs unrestricted funds
A donor-imposed restriction limits how or when the charity may use the income. Restrictions do not delay income recognition, the income is recognised on entitlement and classified in the appropriate fund:
- Restricted funds: donor-specified purpose (literacy programme, after-school club, specific capital project) or time restriction (to be spent in the next financial year).
- Unrestricted funds: general operating income with no donor-imposed limits.
- Designated funds: portions of unrestricted funds set aside by the trustees for a specific purpose. This is a trustee decision, not a donor restriction, and is a UK reporting distinction SORP requires you to show separately in the accounts.
- Permanent endowment: capital that trustees cannot spend, a specific legal concept under the Charities Act 2011. If a donor gives £50,000 "to be held as a permanent endowment," the income from that capital is available but the capital itself is not. Flag any permanent endowment for specialist advice.
A common small-charity mistake is treating a purpose restriction as a condition and deferring income. Under Charities SORP, you recognise the income now and classify it as restricted; you release the restriction (reclassify to unrestricted funds) when the purpose is satisfied and the expenditure is incurred (Charities SORP FRS 102; Charity Commission).
Gift Aid is a recognition event too
The Gift Aid reclaim (25p from HMRC for every £1 a UK taxpayer donates) is recognised as a separate income line, voluntary income: Gift Aid tax recovered, when the charity has entitlement. Entitlement typically arises when the charity submits the claim to HMRC, though many charities align it with the recognition of the underlying donations.
Key Gift Aid mechanics:
- The donor must have signed a Gift Aid declaration (full name, home address, charity name, and confirmation they are a UK taxpayer paying at least as much Income or Capital Gains Tax as the charity will reclaim).
- Claims must be submitted within four years of the end of the financial year in which the donation was received.
- Gift Aid declarations and associated records must be kept for at least six years after the last donation they cover.
- Gift Aid never applies to ticket price, raffle ticket purchases, auction lots at fair value, company donations, or amounts paid for goods or services.
For Gift Aid Small Donations Scheme (GASDS), charities can claim a 25% top-up on small cash and contactless donations of £30 or less without a declaration, up to £8,000 in eligible donations per tax year (HMRC, Gift Aid).
For a small charity: a designated giving page for each restricted fund sets the restriction at the donor's choice point. The conditional-vs-unconditional question is rarer and usually tied to grant agreements (next section).
Recognise grant income the SORP way
Grants are where small-charity treasurers get tripped up most often, because grant agreements use language that sounds transactional ("in consideration of," "deliverables," "milestones") but most grants from UK foundations are voluntary income under Charities SORP. The key question is whether the grant carries a performance condition.
Is the grant voluntary income or income from charitable activities?
Ask: does the grantor receive direct, commensurate benefit, services the grantor would otherwise procure, paid for at a price that represents fair value? If yes, it is more likely income from charitable activities (a performance-related grant or service contract), recognised as performance takes place. If the grantor only benefits indirectly (mission alignment, naming recognition, public good), it is voluntary income, recognised on entitlement when the award is notified (Charities SORP; NCVO).
Conditional vs unconditional grants under SORP
Once categorised, apply the entitlement test to the specific conditions:
- Unconditional grant: signed agreement, no measurable performance condition, no right of return of unspent funds. Recognise income when the award letter is received or the agreement is signed. If purpose-restricted, classify in the appropriate restricted fund.
- Performance-related grant: payment tied to delivery (e.g., "we will pay £X for every young person you support" or "we will reimburse documented programme expenses up to £50,000"). Recognise income as the performance takes place, as qualifying expenditure is incurred or as beneficiaries are served.
Multi-year grants
Suppose a foundation awards your charity a £100,000 grant payable at £25,000 per year over four years, conditional on submitting annual monitoring reports demonstrating at least 50 beneficiaries served per year, and with unspent funds at year end to be returned.
Each year's £25,000 is treated separately. You do not recognise £100,000 at signing. You recognise £25,000 of income each year, in the year the condition (50 beneficiaries plus monitoring report submitted) is met. The unrecognised future tranches are not on the balance sheet as a debtor until entitlement arises for each tranche. Simplified illustrative example; consult your independent examiner or accountant for your charity's specific chart of accounts.
The UK grant landscape
UK charities draw on a wide range of grant sources. The National Lottery Community Fund is the largest funder of community charities in the UK. Arts Council England funds arts and culture organisations. Most foundation grants are voluntary income (no performance condition); central government service contracts are more often performance-related and sit in income from charitable activities. For more on finding UK charity grants, see our guide to grants for UK charities.
UK charity audit and independent examination thresholds
This is where the UK framework differs significantly from US requirements. Under Charity Commission for England and Wales (CCEW) rules:
- Statutory audit required if gross income exceeds £1 million, or if gross income exceeds £250,000 AND gross assets exceed £3.26 million.
- Independent examination required if gross income exceeds £25,000 (but is below the audit threshold).
- Below £25,000 gross income (and for unincorporated charities only): receipts-and-payments accounts are acceptable, with no independent examination required, though trustees may choose one.
Scotland (OSCR) and Northern Ireland (CCNI) have their own thresholds that differ from CCEW, flag this with your independent examiner if your charity operates across borders (OSCR; CCNI). Re-verify current thresholds at Charity Commission before your annual review.
For a small charity: the first time a grant agreement crosses your desk, send it to your independent examiner or accountant for a single-hour review before signing. That hour saves you from accepting a condition you cannot meet, or missing one that turns "easy income" into a deferred liability.
SORP intake decision table
Use this decision logic at intake for every gift above your materiality threshold (£500 or £1,000 is a realistic starting point for most small charities).
|
| Q1: Did the giver receive goods or services of quantifiable value in return? | Trading income / event income. Recognise on delivery (event date, item dispatched). Gift Aid does not apply to this portion. VAT rules apply. | Move to Q2 |
| Q2: Is there a specified performance condition attached, is payment tied to delivery of a measurable activity? | Performance-related grant or service contract. Recognise income as performance takes place. Classify as income from charitable activities. | Move to Q3 |
| Q3: Is there a purpose or time restriction only (no performance condition, just a donor-specified use or timeframe)? | Restricted voluntary income. Recognise on entitlement. Hold in the relevant restricted fund until the purpose is met and expenditure incurred. Gift Aid may apply if the donor has signed a declaration. | Unrestricted voluntary income. Recognise on entitlement. Gift Aid may apply. |
Worked examples
- £500 unrestricted online donation: Q1 no, Q2 no, Q3 no. Recognise now as unrestricted voluntary income. Gift Aid applies if a declaration is held.
- £10,000 restricted grant for the after-school club, no performance condition: Q1 no, Q2 no, Q3 yes (purpose restriction). Recognise now as restricted voluntary income. Release to unrestricted funds as after-school club expenditure is incurred.
- £25,000 performance-related grant tranche, conditioned on serving 50 young people and submitting a report: Q1 no, Q2 yes (payment is tied to delivery). Defer until the condition is met, then recognise as income from charitable activities.
- £50 gala ticket with £20 fair-value meal: Q1 yes for £20 (trading income, recognise on event night), Q1 no for the £30 excess (donation, treat per Q2/Q3; Gift Aid may apply on the excess).
- £5,000 sponsorship with logo placement and an exhibition stand: Q1 yes (the sponsor receives quantifiable promotional value). Trading income. Recognise over the event period as obligations are delivered.
Journal entry examples for common charity transactions
Simplified illustrative examples; consult your accountant or independent examiner for your charity's specific chart of accounts. Account names follow UK charity COA terminology under Charities SORP.
1. Unconditional donation received (£500 unrestricted cash)
Debit: Cash £500
Credit: Unrestricted funds, donations £500
Recognised immediately on receipt under Charities SORP (entitlement, probable, measurable all satisfied). If a Gift Aid declaration is held, the £125 Gift Aid reclaim is recognised separately when claimed.
2. Gift Aid reclaim submitted to HMRC (£125 on a £500 donation)
Debit: Gift Aid receivable £125
Credit: Voluntary income, Gift Aid tax recovered £125
Recognised on entitlement (typically when the claim is submitted via HMRC Charities Online), provided the underlying donation was already recognised.
3. Conditional grant awarded (£25,000, conditions not yet met)
No journal entry at signing. The agreement is disclosed in the notes to the financial statements, but no income or debtor is recorded because the charity does not yet have entitlement under Charities SORP.
4. Conditional grant: conditions met and cash received
Debit: Cash £25,000
Credit: Restricted funds, [programme name] £25,000
If purpose-restricted, the credit lands in the relevant restricted fund. When programme expenditure is incurred against it, release from restricted to unrestricted with:
Debit: Restricted funds, [programme name] £25,000
Credit: Unrestricted funds, net assets released from restrictions £25,000
5. Event ticket sale with donation component (£50 ticket, £20 meal fair value)
At the time of sale:
Debit: Cash £50
Credit: Deferred income, event tickets £20
Credit: Unrestricted funds, donations £30
On the night of the event (performance obligation delivered under SORP):
Debit: Deferred income, event tickets £20
Credit: Income from trading activities, events £20
6. Annual membership dues (£120 annual membership with quantifiable benefits)
At the time of purchase:
Debit: Cash £120
Credit: Deferred membership income £120
Monthly recognition over the membership year:
Debit: Deferred membership income £10
Credit: Membership income £10
If the membership confers no quantifiable benefit to the member (pure support with a "member" label), treat the dues as a donation under Charities SORP instead, and recognise on receipt.
Five income recognition mistakes that put your charity at risk
1. Recognising income at cash receipt rather than on entitlement
Income is recognised when earned, not simply when cash arrives. For unconditional donations, that is when the gift is received or the unconditional pledge is made. For performance-related grants, that is as performance occurs. Booking income too early or too late misrepresents the statement of financial activities and may trigger a qualification from your independent examiner (Charities SORP FRS 102).
2. Preparing receipts-and-payments accounts when accruals accounts are required
Receipts-and-payments accounts are only available to unincorporated charities with gross income below £250,000 that are not required to have a statutory audit. Charitable companies must always prepare accruals accounts. Any charity approaching or above the independent examination threshold (£25,000 gross income) that prepares on a receipts-and-payments basis when the accruals basis is required risks an adverse finding. If you have been running on a simplified basis and are growing, talk to your accountant about a clean transition to accruals before the next year end (Charity Commission).
3. Tracking restricted and unrestricted funds in a single bucket
Donations with donor restrictions belong in a different fund from unrestricted income. Treating them as a single pool masks how much truly unrestricted operating cash you hold, and misrepresents your reserves to trustees and the Charity Commission. Set up your charity financial statements so every income credit lands in the correct fund at the moment of recognition (NCVO).
4. Recognising a multi-year performance-related grant in full at signing
The most common error: recording the full value of a multi-year grant as income in year one. Each tranche is recognised only when entitlement arises for that tranche, when the year's conditions are met. Track each grant in a deferred-income or commitment schedule, not in the operating income line, until conditions are satisfied.
5. Treating a sponsorship with logo placement or promotional benefit as a pure donation
Sponsorships where the sponsor receives quantifiable promotional value (logo on materials, a stand, named mentions, social media reach) have a trading-income component. Treating them as pure donations overstates voluntary income and understates trading income, with potential consequences for Gift Aid validity and VAT exposure if the trading is substantial. When in doubt, split the transaction, document the fair-value calculation, and consider whether the trading sits within the charity directly or should route through a trading subsidiary (Charity Tax Group).
Stay compliant without an accountant on staff
The realistic small-charity compliance posture is not "become an accountant". It is "set up your intake so consistent categorisation is automatic, and reconcile monthly so nothing piles up."
- Document your income recognition policy in writing. A one-page policy, when do we recognise donations, event tickets, and grants; how do we value gifts in kind; what is our materiality threshold (£500 or £1,000 works for most small charities), is enough and is the first thing an independent examiner asks for.
- Train staff and volunteers on the four SORP income classes. One 30-minute walkthrough using the decision table above prevents the vast majority of intake errors. Most volunteer trustees do not know the difference between a restricted fund and a performance condition, a short briefing pays dividends at every year end.
- Review grant agreements with your independent examiner or accountant before signing. One billable hour up front beats six months of cleanup at audit.
- Reconcile restricted-fund balances monthly. Twenty to thirty minutes a month beats a year-end forensic exercise. Match your fundraising platform payouts to your accounting software at month close.
- Bring your accountant in once a year to review unusual items: multi-year grants, conditional sponsorships, large gifts in kind, anything new.
- Use the right tools for the intake layer. Separate forms for donations, tickets, shop, and memberships keep the categorisation clean. Campaign and fund tagging captures the restriction at the donor's choice point.
- If you are not yet a registered charity: unincorporated associations, CICs, and community groups that have not registered with the Charity Commission cannot claim Gift Aid and are ineligible for most grant-funders that require registered-charity status. If your organisation is growing, explore registration with the Charity Commission. Many readers will be at this stage, it is a common and entirely manageable position.
- UK GDPR and PECR govern donor data, including the personal data on Gift Aid declarations, which is regulated data. If you collect Gift Aid declarations electronically, your platform must comply with UK GDPR. Verify your platform's compliance with the Information Commissioner's Office (ICO).
For a small charity: the goal is not to do your own accountant's work. The goal is to hand your independent examiner or accountant clean, pre-sorted data once a year so the engagement is short and uneventful. The intake layer is where you earn that.
How Zeffy gives you clean transaction data for income recognition
Zeffy is a 100% free fundraising platform. It is not accounting software, and it does not apply Charities SORP judgement for you. What Zeffy does is make the intake layer clean, so the SORP work is straightforward when your bookkeeper or independent examiner applies it.
- Transaction-type separation at the source. Donation forms, ticketing, shop, memberships, and peer-to-peer campaigns are separate form types. A ticket sale never lands in your books as a donation.
- Campaign and fund tagging at intake. Every gift is tagged by the campaign and fund the donor chose, so restricted donations stay restricted from the moment they are captured.
- Gift Aid declaration capture at donation. Zeffy captures the donor's name, home address, and taxpayer confirmation at the point of giving, the three elements HMRC requires for a valid Gift Aid declaration, so your records are compliant from day one.
- Exportable transaction records. Pull a full CSV at any time, or use Zeffy's free QuickBooks integration to sync payouts pre-sorted by campaign and fund, so each tranche lands in the correct QuickBooks account without a manual reclassification entry. QuickBooks Online is one of the most widely used accounting platforms for small UK charities alongside Xero.
- No platform fee, no transaction fee, no card fee. Ever.
Frequently asked questions
How is UK charity income recognition different from US accounting standards?
UK charities do not apply US GAAP or FASB standards. The governing framework is Charities SORP (FRS 102), the Statement of Recommended Practice for UK charities applying FRS 102. Where US accounting uses a five-step exchange-vs-contribution model (ASC 606 and ASC 958-605), UK charity income recognition turns on a three-part entitlement test: the charity must have entitlement to the resources, receipt must be probable, and the amount must be measurable reliably. Income is then categorised into SORP income classes (donations and legacies; income from charitable activities; income from other trading activities; investment income; other), and restricted or unrestricted funds are used instead of the US "net assets with donor restrictions" classification. Gift Aid, not US-style tax deductibility, is the central donor-tax mechanism.
How do I account for a multi-year grant under Charities SORP?
Do not recognise the full grant value in year one. Under Charities SORP, each year's tranche is recognised only when the charity has entitlement to it, typically when the conditions for that year are met (for example, monitoring report submitted and beneficiary target reached). If the grant pays on performance (delivery of a service), recognise income as that performance occurs. The unrecognised future tranches remain off the balance sheet as deferred income or simply as a commitment disclosed in the notes, not as a debtor, until entitlement arises for each tranche. Consult your independent examiner or accountant for your charity's specific chart of accounts.
What is the difference between a restricted fund and a performance condition in a grant?
restricted fund holds income where the donor or grantor has specified how or when it must be used, but there is no condition that must be met before the charity receives it. The charity has entitlement on receipt; the restriction governs expenditure. A performance condition means the charity must deliver a measurable activity or outcome before entitlement arises, if the condition is not met, funds are not paid or must be returned. Restricted-fund income is recognised on entitlement (immediately, when received) and held in a restricted fund until the restriction is met. Performance-related income is deferred until the performance takes place. Getting this wrong, treating a performance condition as a restriction and recognising too early, is one of the most common findings in small-charity independent examinations.
How do I record event ticket revenue when part of the ticket price is a donation?
Split the ticket price at the intake stage. Identify the fair value of what the attendee receives (for example, the cost of the meal or the value of entertainment at a gala dinner). That portion is trading income (income from other trading activities under SORP), deferred until the event night and recognised when the event takes place. Any amount the attendee pays above fair value is a donation (voluntary income), recognised immediately on receipt. If the donor has signed a Gift Aid declaration and HMRC's donor benefit rules are satisfied, you can claim Gift Aid on the donation portion only. Note that VAT may apply to the trading-income element depending on whether the fundraising event exemption (HMRC Notice 701/1, up to 15 events of the same kind per location per year) applies. Use £ figures and document the fair-value calculation each year.
Does my charity need an audit or an independent examination?
Under Charity Commission for England and Wales (CCEW) rules: a statutory audit is required if gross income exceeds £1 million, or if gross income exceeds £250,000 and gross assets exceed £3.26 million. An independent examination is required if gross income exceeds £25,000 (but falls below the audit thresholds). Below £25,000 gross income, an unincorporated charity may prepare receipts-and-payments accounts without an independent examination, though trustees may choose one. Charitable companies must always prepare accruals accounts regardless of income level. Scotland (OSCR) and Northern Ireland (CCNI) have their own thresholds that differ from CCEW, always verify with your regulator before assuming the CCEW figures apply (Charity Commission; OSCR; CCNI). Re-verify current thresholds before your annual review, as they are subject to change.
Can Zeffy generate SORP-compliant accounts?
No. Zeffy is the fundraising intake layer, it captures donations, ticket sales, shop transactions, memberships, and peer-to-peer gifts, with campaign and fund tagging and Gift Aid declaration capture at the point of giving. Zeffy also provides exportable transaction records and a free QuickBooks integration that syncs payouts pre-sorted by campaign and fund. Your SORP-compliant accounts (the statement of financial activities, balance sheet, and notes) are prepared from your accounting system by your accountant or independent examiner using the clean, pre-sorted data Zeffy provides. Zeffy does not provide accounting, legal, or tax services.
.avif)
.png)
.avif)
.webp)
