As charities prepare for the Charities Statement of Recommended Practice (SORP) 2026, one of the most significant accounting changes is the new treatment of leases. This update impacts all charities with lease agreements—whether for premises, vehicles, or equipment—and especially those with income under £250,000.
What is Changing?
From 1 January 2026, the Charities SORP requires charities to recognise most leases on their balance sheet as right-of-use assets and corresponding lease liabilities. This moves away from purely off-balance sheet treatments, increasing transparency but also adding accounting complexity.
For small charities, this means:
- Reporting lease assets and liabilities within financial statements.
- Changes in how expenses related to leases are recognised, typically replacing operating lease expenses with depreciation and interest.
- Additional disclosure requirements detailing lease nature and amounts.
Why Does This Matter?
The changes aim to align charity accounting with modern financial reporting standards, improving financial clarity for trustees, donors, and regulators. However, complying with these new rules can pose a significant challenge for small charities, often lacking dedicated accounting resources.
Failing to comply may lead to inaccurate financial reporting, increased audit queries, potential funding obstacles, and even regulatory penalties.
How Friendly Assist Accountancy Can Support You
To help small charities through this transition smoothly, Friendly Assist Accountancy Ltd offers tailored support based on income thresholds and cause focus:
- Pro bono support for charities focused on autism, ADHD, and homelessness, with income up to £50,000.
- A 30% discount on fees for charities up to £250,000 income with strong ties to Newcastle or the North East.
- Selective, ethical partnership focused on well-governed charities without unresolved compliance issues.
Hiring expert assistance now can save your charity time, stress, and money while ensuring you meet new compliance requirements confidently.
Next Steps for Small Charities
- Review your lease agreements to identify those affected by SORP 2026.
- Prepare to recognise these leases on your balance sheet in your 2026 accounts.
- Reach out to Friendly Assist for a no-obligation discussion about how we can support your charity.
- Stay informed by visiting official charity accounting resources and trusted professional advisers.
Useful Resources
- Charities SORP Official Website
- Charity Commission: Changes to Charity Accounting and Reporting
- RSM UK Insights: What the Charity SORP’s Changes to Lease Accounting Mean
- ICAEW Charitable Sector SORP Guidance
For small charities in the North East facing these changes, early preparation and expert guidance are key to a smooth transition. Contact Friendly Assist Accountancy today to see if you qualify for pro bono support or discounted services.
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