A charity recognises a legacy as income when it is probable that the legacy will be received and its value can be measured reliably. SORP 2026 has removed the separate requirement to show entitlement, so the test now matches FRS 102 paragraph PBE34.70A. Whether the test is met depends on evidence from the estate, such as the will, probate, executors’ correspondence and estate accounts, and on whether valuations or disputes still leave the amount uncertain.
Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.
When is a legacy recognised as income?
Legacies are non exchange income: the charity receives value without giving equal value in return. FRS 102 paragraph PBE34.70A, which applies to public benefit entities, says a legacy is recognised when it is probable that it will be received and its value can be measured reliably. The same paragraph says that whether those conditions are met may be affected by events such as valuations and disputes.
SORP 2026 deals with legacies at paragraphs 5.85 to 5.96. ICAEW’s summary of the changes explains that the old requirement for entitlement has been removed, so the recognition criteria now line up with FRS 102. The RSM guidance published by ICAEW makes the related point that the core tests, probable and reliably measurable, were already in the previous SORP. In practice the change removes an extra hurdle rather than creating a new rule. For the wider set of income changes, see changes in the new Charities SORP.
What evidence shows that a legacy is probable?
Neither FRS 102 nor the SORP gives a checklist, so trustees and their accountants have to judge each case, and the evidence needs to be kept on file for the examiner or auditor. Points usually considered include:
- Notice of the gift. A copy of the will, or a letter from the executors, confirming the charity is a beneficiary. Writing for ICAEW, Richard Bray notes that charities rarely know about a legacy in advance and may learn of it from a notification service.
- Grant of probate. Bray describes probate in England and Wales as, in many cases, the first practical point at which a charity can quantify what it is due, while noting that not every will goes through probate. In Scotland the equivalent process is confirmation.
- Executors’ correspondence and estate accounts. Interim distributions, statements of the estate’s assets and liabilities, and draft or final estate accounts all help show both that payment will happen and how much it will be.
- Obstacles. A contested will, a claim against the estate, or an asset that cannot yet be valued or sold may make receipt less than probable or the amount unmeasurable.
Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.
From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.
See my price in 2 questions or call 01795 841 310.
★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews
How is a legacy measured?
FRS 102 paragraph PBE34.73 measures non exchange income at the fair value of the resources received or receivable. The type of legacy drives how easy that is:
- Pecuniary legacy: a fixed sum. Once receipt is probable, measurement is straightforward, subject to whether the estate can pay in full.
- Residuary legacy: a share of what is left after debts, tax and other gifts. The RSM guidance says charities should measure or estimate the fair value based on the information available. If property has not been valued or liabilities are unclear, the amount may not yet be reliable.
- Gifts of assets: such as shares or a property, measured at fair value, which may depend on a valuation.
Charities with many legacies may use a portfolio approach. PBE34.70A allows estimates and assumptions to be applied to a portfolio of legacies where the result is not expected to differ materially from assessing each legacy individually.
What about information received after the year end?
PBE34.70A requires charities to apply Section 32 of FRS 102 to decide whether evidence about a legacy received after the reporting date is an adjusting event. The SORP has moved some legacy content into Module 13. ICAEW’s training material quotes paragraph 13.9’s examples of events that require adjustment, including:
- notice after the year end that a legacy is no longer probable because the will is being contested; and
- a payment received, or notified as receivable by the executors, after the year end but before the accounts are approved, where it is clear the executors agreed the payment before the year end.
A payment that the executors decided on only after the year end is not adjusting. Our page on events after the reporting period explains the general rules.
What if the recognition test is not met?
An unrecognised legacy may still need to be disclosed. PBE34.70A says that where a legacy is a contingent asset, it is not recognised but the disclosures in paragraph 21.16 apply. Paragraph 21.16 requires a description of the contingent asset and, where practicable, an estimate of its financial effect when an inflow is probable (more likely than not) but not virtually certain. Where a legacy is an asset but the recognition criteria are not met, charities are encouraged to disclose information relevant to understanding their financial position. Paragraph PBE34.74 separately requires disclosure of unfulfilled conditions or other contingencies on non exchange resources not yet recognised. The wider rules are in provisions and contingencies.
Which fund does a legacy go into?
That depends on the will. A legacy for the charity’s general purposes is unrestricted. A legacy for a stated purpose, such as a particular branch or project, is restricted, and a legacy that the will says must be invested with only the income spent is endowment. FRS 102 paragraph PBE34.68 confirms that a restriction does not stop the legacy being recognised as income. See restricted, unrestricted and endowment funds.
Under SORP 2026, Tier 2 and Tier 3 charities must also explain their legacy income in the trustees’ annual report.
How does this work in practice?
Illustration only. A charity with a 31 March 2027 year end is named in three wills:
| Legacy | Position at 31 March 2027 | Treatment |
|---|---|---|
| £10,000 pecuniary gift | Probate granted, executors confirm estate is solvent | Recognise £10,000 as income and a debtor |
| 25% of residue | Probate granted, house valued at £400,000, other assets £50,000, liabilities £30,000 | Recognise an estimate of £105,000 (25% of £420,000), less any known costs |
| 50% of residue | Will contested by a family member, outcome uncertain | Do not recognise; disclose as a contingent asset if receipt is still more likely than not |
If, in May 2027 before the accounts are approved, the executors confirm they had agreed an interim distribution on the contested estate in March, the charity reassesses at the year end on that evidence.
What mistakes come up most often?
- Waiting for the cash when the evidence shows receipt was probable and measurable at the year end, which understates income and assets.
- Recognising a residuary legacy before there is any reliable information about the estate’s value.
- Ignoring post year end correspondence from executors when finalising the accounts.
- Putting a legacy for a specific purpose into unrestricted funds.
- Omitting contingent asset disclosure for material legacies that are not yet recognised.
- Applying the old entitlement wording from SORP 2019 to periods under SORP 2026.
Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.
Related Accountapedia entries
- Recognising donations and grants in charity accounts
- Public benefit entities and concessionary loans
- Donated goods, services and volunteer time
- Can a restricted fund be in deficit
- The Charities SORP explained
Sources
- Financial Reporting Council: Frs 102
- ICAEW: Summary of changes
- ICAEW: Income recognition charities sorp 2026 rsm faq
- ICAEW: Sorp 2026 practical updates in action
- ICAEW: The legacy question what is wrong with accounting for legacies
- ICAEW: How can we answer the legacy question in the next charities sorp
- ICAS: Charities statement of recommended practice 2026 the headlines
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.