Guidance

Charity Annual Return 2023: glossary

Updated 8 March 2023

Applies to England and Wales

Accruals accounts

Accruals accounts report the value of resources held by an organisation at the beginning and end of any accounting year and the movement of those resources between the two dates.

They require the measurement and valuation of assets and liabilities. A clear understanding of the rules and conventions used by accountants is necessary for their preparation. Accruals accounts include all resources (compared with simply cash resources reported in receipts and payments accounts) and a report on movement of resources (in the Statement of Financial Activities) which must reconcile with a statement of opening and closing resources (the balance sheet).

Businesses authorised to provide ‘payment services’

Services provided by financial firms, which allow a person or organisation to transfer funds to another person or organisation (or make a payment), usually electronically.

They may be internet-based allowing online transactions or may allow payments facilitated by the use of mobile phones.

Cash couriers

People who physically transport currency on their person or in accompanying luggage, often from one jurisdiction to another.

Central government

Central government means the United Kingdom Government or any part of it. This includes all government departments and executive agencies, including the NHS.

Connected organisation

A business in which a trustee or a family member of a trustee has a substantial interest. Substantial interest means they hold at least 20% of the shareholding or voting rights.

Contract income

Contract income is income received by a charity under a legally binding contract, normally in exchange for the supply of goods or services. It does not include grant agreements.

Corporate donor

A corporate body or for-profit institution that has made a donation to your charity.

This should exclude income from professional or third-party fundraisers and commercial participators. Please see the Code of Fundraising Practice for definitions of these terms.

Cryptocurrency

A privately issued digital currency, for example Bitcoin, Ether and XRP, that is not issued by a central bank. Cryptocurrencies operate by using a type of distributed ledger technology (DLT), such as blockchain.

Custodian trustee

A corporation appointed by an unincorporated charity to hold property for the charity. Custodian trustees must act on the lawful instructions of charity trustees.

Disclosure and Barring Service (DBS) check

A DBS check is a check employers can make on an individual’s record where they are undertaking an eligible role or activity.

There are four levels of DBS check available:

• Basic DBS check
• Standard DBS check
• Enhanced DBS check
• Enhanced with Barred List(s) check.

Charities should always obtain the required DBS check if a role is eligible for one. For more information on DBS checks, you can read the DBS Guidance for Employers.

Donations and legacies income

This includes:

• gifts and donations received or receivable including legacies
• any tax reclaimed on amounts received under gift aid
• grants that provide core funding or are of a general nature
• membership subscriptions and sponsorships where these are, in substance, donations
• gifts in kind and donated services and facilities

Employed by your charity

Refers to a person who works under an employment contract with your charity, with employment rights. For more information, check government guidance on employment status.

Employee benefits

All forms of consideration paid by the charity in exchange for services rendered by an employee. It includes all remuneration, salary, benefits, profit-sharing and bonuses, and any termination payment made.

Employee payroll

All forms of consideration paid by the charity in exchange for services rendered by its employees. It includes all remuneration, salary, benefits, profit-sharing and bonuses, employer’s pension contributions and any termination payment made.

For charities with employee members of a defined benefit pension scheme, employee benefits include the change in the net defined liability arising from employee service rendered during the reporting period and the cost of plan introductions, benefit changes, curtailments and settlements.

Endowment

Endowment funds are resources received by the charity that represents capital. Charity law requires trustees to invest or to retain and use endowment funds for the charity’s purposes.

The term endowment applies to permanent endowment, where the trustees have no power to convert it into income and apply it, and to expendable endowment where the trustees do have this power.

Fixed-term contract

Refers to employees of your charity with an employment contract that ends on a particular date, or on completion of a specific task, e.g. a project. For more information, check government guidance on fixed term contracts.

Formal written agreement

Usually in the form of a binding legal contract setting out the nature of the relationship and the respective roles and responsibilities of the charity and the partner.

Find further guidance on written agreements with partners outside the United Kingdom and a template agreement.

Grant income

Grant income refers to any voluntary income or transfer of property received by the charity from central government or local authority.

The voluntary income or transfer may be for the general purposes of the charity, or for a specific purpose. It may be unconditional or be subject to conditions which, if not satisfied by the charity, may lead to the grant property acquired with the aid of the grant or part of it being reclaimed by the grant-maker.

Governing document

A legal document that sets out the charity’s purposes and how the charity is run. It is usually in the form of a constitution, memorandum and articles of association, or a trust deed or a will.

Gross income

Gross income is a term defined in charity law and is used to determine the thresholds governing the requirements for accounts’ scrutiny, the preparation of accruals accounts by non-company charities, submission of reports and accounts and any annual return to the charity regulator.

Holding trustees

Individuals appointed by unincorporated charities to hold property for a charity. Holding trustees must act on the lawful instructions of the charity trustees and in accordance with any provisions in the governing document.

Income from charitable activities

This includes:

• sale of goods or services as a charitable activity
• sale of goods made or services provided by the charity’s beneficiaries
• letting of non-investment property in furtherance of the charity’s objects
• grants specifically for the provision of goods or services as part of charitable services or services to beneficiaries (including performance-related grants)
• ancillary trades connected with the above

Income from other trading activities

This is income from trading activities that specifically raise funds for the charity, for example:

• fundraising events such as jumble sales, firework displays and concerts
• sponsorships and social lotteries which are not pure donations
• shop income from selling donated goods and bought-in goods
• providing goods and services other than for the benefit of the charity’s beneficiaries
• letting and licensing property held mainly for functional use but temporary surplus to requirements

Income from investments

This is income from investment assets, including dividends, interest receivable and rent, but excludes realised and unrealised investment gains and losses.

Informal Value Transfer Systems (IVTS)

A method of moving money, generally to another country, usually without it entering the formal banking system. These are operated by IVTS agents.

Local authority

Local authority refers to a county council, a district council, a London borough council or a parish council in England, and a county council, county borough council or community council in Wales.

Money Service Businesses (MSBs)

Businesses that exchange currencies, transmit money or cash cheques for their customers.

Out of pocket expenses

Out of pocket expenses are legitimate expenses trustees are entitled to claim while engaging on trustee business. For example, the reasonable cost of travelling to trustee meetings.

Public address

The postal address to which correspondence to the charity should be sent.

Receipts and payments accounts

Receipts and payments accounts are statements that summarise the movement of cash into and out of the charity during the financial year. In this context ‘cash’ includes cash equivalents, for example, bank and building society current and other cash accounts into which money is banked or used to make payments.

Related parties

Related parties is a term used by the SORP (Statement of Recommended Practice) that combines the requirements of charity law, company law and the Financial Reporting Standard applicable in the UK and the Republic of Ireland. The term is used to identify those persons or entities that are closely connected to the reporting charity or its trustees. Read the full list of related parties before answering the question.

Self employed

Refers to a person who runs a business for themselves who is not paid through PAYE and does not have the rights and responsibilities of an employee. For more information, check government guidance on self-employment.

Spending

Spending is a cash term. It excludes depreciation (reduction in the value of an asset over time), amortisation (the reduction over time of a loan or debt through regular payments) and impairment (the permanent reduction in value of an asset).

This is not the same as expenditure which is an accruals term that includes non-cash items. Expenditure is the amount of a charity’s resources that have been spent or otherwise used up in carrying out its activities. An expense results in either a decrease in a charity’s assets or an increase in its liabilities.

Spend (outside the United Kingdom)

Related to cash applied on a project or programme outside the United Kingdom (whether applied directly or otherwise, for example via a third party) and should not include any non-cash adjustments (for example, depreciation of an asset).

The Official Custodian

A corporation created by statute to hold land on behalf of charities. In practice they are a member of the Charity Commission’s staff who is appointed to this role.

Trading subsidiary

Any non-charitable trading company owned by a charity or charities to carry on a trade on behalf of the charity (or charities), for example a charity shop.

Trading subsidiary also includes a company which is wholly owned by more than one charity, even if it is not technically a subsidiary of any of the charities which own it.

Volunteer

A person who carries out charitable activities for your charity without being paid for their time.