OG 715-08 CIO: Accounting and reporting by CIOs

Last reviewed:
Last updated:
31 December 2013

Policy Statement/Overview

The accounting and reporting requirement of charity law applies to CIOs. All CIOs, regardless of their annual income, must submit to us accounts and an annual return.

Summary of the guidance

This guidance gives information about how the accounting and reporting requirements of charity law apply to CIOs and identifies differences in how that framework applies to CIOs. You will find all the information under the Legal/Policy/Accountancy Framework tab.

Legal/Policy/Accountancy Framework

E1 Overview


A CIO is a charity established under charity law and so:

  • a CIO is subject to the accounting, reporting and scrutiny requirements set out in Part 8 of the Charities Act 2011
  • the Charities (Accounts and Reports) Regulations apply to the:
    • accounts (including group accounts) of a CIO when prepared on an accruals basis (the accounts must be prepared in accordance with the methods and principles of the Charities SORP, except where another more specialised SORP applies)
    • content of the trustees’ annual report
    • the audit or examination report made by the auditor or independent examiner on the accounts
  • in particular, the trustees of a CIO may:
    • apply for dispensations from audit and its substitution by an independent examination if there are exceptional circumstances that justify an examination rather than an audi


    • apply for our consent to change the length of the financial year in the limited circumstances where such consent is required (for further information refer to OG15 B3).


There are key differences regarding:

  • the filing requirements for CIOs (see section E2)


  • the requirement for certain notes to receipts and payments accounts of a CIO (see section E3)


There are three significant practical issues that may arise where property is being transferred to a CIO by another charity:

  • the first day of a CIO’s financial year (see section E4)
  • accounting for transfers of property held on trust by an unincorporated charity to a CIO (see section E5)


  • accounting for transfers of property held on trust by a company charity to a CIO (see section E6)


E2 Filing requirements for CIOs

    A CIO is an incorporated body and so the trustees of a CIO are not personally liable for its normal trading debts and liabilities. The privilege of limited liability brings with it additional requirements for accountability which are reflected in the filing requirement for CIOs.

    All CIOs, regardless of their income, must submit to us:

  • a copy of the annual report and accounts and, where applicable, the report of the auditor or examiner (section 163 of the Charities Act)
  • an Annual Return (section 169 of the Charities Act)

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E3 The required notes where receipts and payments accounts are prepared by a CIO


Where the gross annual income is less than £250,000 the trustees of a CIO, like other non-company charities, can opt to prepare their accounts on a receipts and payments basis.


Where a CIO has opted to do this it is required, under section 133 of the Charities Act, to prepare:

  • a receipts and payments account


  • a statement of assets and liabilities

The form and content of those statements is not set out in law or regulation.


CIOs have an additional requirement placed upon them by the Charitable Incorporated Organisations (General) Regulations 2012 to add specific notes to the statement of assets and liabilities. The required notes are:

  • particulars of any guarantee given by the CIO, where potential liability under the guarantee is outstanding at the date of the statement


  • particulars of any debt outstanding at the date of any statement which is owed by the CIO and which is secured by an express charge on any assets of the CIO

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E4 First day of a CIO's financial year


A CIO does not come into being until it is entered on the register of charities. The first financial year of a CIO begins on the day it is entered on the register of charities and it must be of no less than 6 months and no more than 18 months duration.

An applicant cannot require registration on a particular day. This is potentially an issue if the winding up of a charity and the transfer of its assets to the CIO is being planned by the applicant to coincide with the registration of the CIO. However, as the first financial year of a CIO can be as little as 6 months or as long as 18 months, it should be possible for the trustees to adjust the CIO’s first financial year to preserve a particular financial year-end if so desired.

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E5 Accounting for transfers of property held on trust by an unincorporated charity to a CIO

The requirements of charity law to distinguish:

  • unrestricted funds, held for any purposes of the charity


  • restricted funds, whether restricted income or endowment

apply equally to CIOs as to any other charity.


Where trustees of an unincorporated trust are promoting a CIO as a means of obtaining limited liability, they will be seeking to transfer the assets held on trust to that CIO once it is registered.

The CIO will have its own registered charity number - it does not take over the charity number of the unincorporated charity which we anticipate will be wound up.  However, to safeguard future legacies the trustees may decide to retain the unincorporated charity as a ‘shell’ charity in which case the trustees may request a linking direction (see sections B3 and B4 of OG715-04 for more information on this).

In the case of transfer of a trusteeship, the unincorporated charity ceases to exist as it is wound up and:

  • the unrestricted funds transferred are unrestricted funds of the CIO and are its general funds (corporate property which must be applied to further its purposes)
  • any restricted income funds transferred and any endowment funds transferred are special trusts, the administration of which is transferred to the CIO


In producing its accounts the CIO reports the different funds held or administered by it on trust or as its corporate property in a single set of accounts. Within its accounts the different funds are distinguished in line with principles set out in the Charities SORP.

The recipient CIO is not required to account for funds prior to its formation. There is therefore no requirement for memorandum figures for any prior period relating to the unincorporated charity. If memorandum figures are produced for a comparative period, then:

  • there should be an entry in the Statement of Financial Activities (SoFA) to show that the balance of funds held by the unincorporated charity were cleared to nil by transfer or gift to the CIO, on its formation
  • the notes to the accounts should give:
    • an appropriate explanation of the incorporation and transfer of funds
    • an analysis of the amounts transferred by type of fund

The recipient CIO should treat the funds transferred to it as a gain in its accounts and reports them as:

  • components of income

and where applicable,

  • a receipt of endowment


The transfer of funds to the CIO on its incorporation should be presented as a separate heading or row in the SoFA with a clear explanation provided in the notes to the accounts of the funds transferred. This is a requirement in the case of CIOs reporting under the Charities SORP (SORP paragraph 75).

In certain circumstances, it may be possible to regard the incorporation as part of group reconstruction and in such cases merger accounting can be used. Before adopting such an approach, the circumstances should be discussed by the charity with its auditor to ensure the criteria for merger accounting are met.

Where the transfer is by way of a merger of one or more charities with the new CIO then merger accounting may be adopted for the reconstruction. The charity will need to agree with its auditor whether the criteria for merger accounting are met. The accounting treatment will present the merged charities as though they have been operating as one organisation since their inception. Prior year comparatives in the SoFA and Balance Sheet will also be based on the merged charities together. There will be no need to make any adjustments to any of the amounts transferred to take account of fair values as the use of historic costs is acceptable when merger accounting methods are used. The merger may be registered with us and this is a requirement where the process has involved a vesting declaration.

Where an unincorporated charity does not transfer all its unrestricted property but intends to remain in existence, the trustees may wish to appoint the CIO as trustee and obtain a linking direction. In this case, the unincorporated charity and the CIO will be treated as a single charity for registration and accounting purposes. The unincorporated charity will be treated as a distinct component within the accounts of the reporting CIO. As the CIO’s accounts include a linked charity, the comparative amounts presented for the prior period should include those of the unincorporated charity as memorandum figures.

Where all the unrestricted property of the unincorporated charity is transferred by vesting declaration and the transfer of the property held as permanent endowment or special trusts is included in the declaration, its effect is to transfer the special trusts to the CIO to hold on the original trusts. The CIO will be a trust corporation for this purpose. The CIO and the permanent endowment or special trusts will be treated as if a linking direction had been made and so a linking direction is not necessary in this case. If the trustees do not wish the CIO and the permanent endowment and special trusts to be treated as a single charity for registration and accounting purposes, the Commission can direct that the endowment and special trusts be separately registered and accounted for.

Where memorandum figures are produced, the effect is that the CIO has opening fund balances in its accounts representing the fund balances of the linked charity at the time that the CIO was registered.

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E6 Accounting for transfers of property held on trust by a company charity to a CIO

The requirements of charity law to distinguish:

  • unrestricted funds, held for any purposes of the charity


  • restricted funds, whether restricted income or endowment

apply equally to CIOs as any other charity.


The regulations for the conversion of a company charity into a CIO have yet to be made. This guidance will be updated once those regulations have been made.

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