The Economic Crime and Corporate Transparency Act (ECCTA) has introduced significant changes aimed at tackling economic crime and enhancing corporate transparency. While the primary focus of the Act is on corporate entities, UK charities are also affected - especially those that are registered as companies.
What are the implications of the ECCTA for charities?
Increased compliance burdens
The ECCTA imposes new compliance requirements on charities, particularly larger ones. Charities that meet certain criteria (eg. more than 250 employees, over £36 million in turnover or more than £18 million in total assets) must now adhere to stricter regulations to prevent fraud. This includes implementing robust policies and procedures to mitigate risks, which can lead to increased administrative costs and resource allocation.
Enhanced scrutiny by Companies House
One of the key changes under the ECCTA is the transformation of Companies House from a passive record keeper to an active regulator. Charities must now ensure that their filings are accurate, complete and verifiable. This increased scrutiny means that charities need to be more diligent in their reporting and may face penalties for non-compliance.
Digital filing requirements
The Act mandates digital filing of company accounts, which must be fully tagged for verification purposes. Charities, regardless of size, must comply with these requirements, potentially leading to disproportionate impacts on smaller charities that may lack the necessary technological infrastructure.
Failure to prevent fraud offence
A significant provision of the ECCTA is the introduction of the "failure to prevent fraud" offence, effective from September 2025. Charities that fall within the scope of this provision must demonstrate that they have taken reasonable steps to prevent fraud. Failure to do so could result in liability, emphasising the need for comprehensive fraud prevention measures.
What should charities do?
To navigate these changes, charities should:
Review and update policies
Ensure that all policies related to fraud prevention and economic crime are up-to-date and robust.
Invest in training
Provide training for staff on the new compliance requirements and the importance of accurate reporting.
Embrace technology
Invest in digital tools and systems to facilitate compliance with the new filing requirements.
Seek professional advice
Get in touch with your charity specialist at UHY to ensure that all aspects of the ECCTA are understood and implemented effectively.
Summary
While the ECCTA presents challenges for UK charities, it also offers an opportunity to strengthen governance and transparency. By proactively addressing the new requirements, charities can not only comply with the law but also enhance their credibility and trustworthiness.
The next step
At UHY, we are committed to helping you prosper by providing expert guidance and support through these regulatory changes. Please get in touch with Harriet Hodgson-Grove or your usual UHY charity adviser for more information.
