{"id":3667,"date":"2022-04-01T09:29:15","date_gmt":"2022-04-01T08:29:15","guid":{"rendered":"https:\/\/cloud9accountingteam.co.uk\/?p=3667"},"modified":"2022-04-01T09:29:40","modified_gmt":"2022-04-01T08:29:40","slug":"changing-company-accounting-periods","status":"publish","type":"post","link":"https:\/\/cloud9accountingteam.co.uk\/sk\/changing-company-accounting-periods\/","title":{"rendered":"Changing Company Accounting Periods – The Implications"},"content":{"rendered":"

Changing company accounting periods – the implications<\/span><\/b>\u00a0<\/span><\/p>\n

The usual method of incorporation is via Companies House WebFiling or Company Formation Agent (although paper submissions are still accepted). If incorporating via WebFiling there is the added benefit of <\/span>HMRC automatically being notified by Companies House when a\u202fnew company\u202fhas been formed. HMRC will then usually issue a ‘Notice to deliver a tax return’ confirming the reporting date of the first accounts.<\/span> In most cases, the notice period\u202fcoincides with an accounting period\u202fof the company and a return is then submitted for a matching period.\u00a0<\/span>\u00a0<\/span><\/p>\n

The first accounting period usually covers more than 12 months because the starting date is the date that the company was incorporated ending on the \u2018accounting reference date\u2019, i.e. the last day of the month the company was set up. In the following years, the accounting reference date will normally cover the company\u2019s financial year.<\/span>\u00a0<\/span><\/p>\n

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Example\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

If a company is incorporated on 11 May 2022, its accounting reference date will be 31 May 2023, so the first accounts cover 12 months and 3 weeks. The accounts will be from 1 June to 31 May in the following years.<\/span>\u00a0<\/span><\/p>\n

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Although Companies House sets the accounting period dates, the dates covering the first tax return will depend on whether or not the company started trading on the same day that it was incorporated. This because a company usually <\/span>first\u202fcomes within the charge\u202fto corporation tax when the company commences a trading activity. However, an accounting period will also be deemed to have commenced as soon as the company acquires a source of income (which could be the opening of an interest-bearing bank account).<\/span>\u00a0<\/span><\/p>\n

Shortening the accounting period<\/span><\/b>\u00a0<\/span><\/p>\n

The period covered by a tax return (the \u2018accounting period\u2019 for Corporation Tax) cannot be longer than 12 months. So to cover the first accounting period two tax returns may have to be filed (in the above example one for the year ended 10 May 2023 and another for the period 11 May 2023 to 31 May 2023); if so, there will also be two\u202fpayment deadlines. Only one return will be required in the following years — usually covering the same financial year as the accounts. The submission of two tax returns for just a few weeks (sometimes days) can be made more accessible by applying to shorten the accounting period to the end of the month before. Therefore, in the example above by applying to shorten so that the end date is the last day of the month before, only one set of accounts is required for the period 11 May 2023 to 30 April 2024 and also only one tax return and one tax payment.<\/span>\u00a0<\/span><\/p>\n

Late submission of accounts to Companies House results in an automatic penalty of \u00a3150. Successful appeals against such penalties are rare. Of course the way to avoid a penalty is to submit the accounts on time. However, if you can see that you will not be able to make the deadline for whatever reason there is a way to avoid any penalty by shortening the accounting reference date, gaining an additional three months to submit.<\/span>\u00a0<\/span><\/p>\n

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When the accounting reference date is shortened the new deadline for filing accounts at Companies House becomes the longer of:<\/span>\u00a0<\/span><\/p>\n