Changing your company yearend
The usual yearend date (Accounting reference date) of a company will come on the last day of the month that it was registered with Companies House. For example, a company that was incorporated on 8th November 2015 will has a yearend date of 30th November. Therefore, the company first yearend will come on 30th November 2016. The yearend will then fall on this date each following year, except if the owners choose to change it. Any adjustment of the yearend date will change the extent of the company’s financial year.
The filling deadline of the accounts will change following any changes to the yearend reference date.
In most cases a business owner can only change the yearend date once in five years, however there are several reasons why a company owner might think of changing the yearend reference dates, in these articles we will look at business and tax advantages of changing a company yearend.
If the company which was recently incorporated is part of a group, it might wish to have the same year end as the other members of the group and in particular that of its parent company.
This might make the preparation of management accounts reports and the group financial statements eloquent, easier and would avoid having to prepare interim accounts for the company.
For certain companies, whose trade might be seasonal, they might wish to avoid having to prepare accounts or conduct stock takes during their busy periods.
For example, a company manufacturing Christmas decoration might want to avoid a 30 November year end as they would likely be laden with stock and be in the midst of preparing for the December month.
An additional benefit is related to industrial competition. When a company matches up the yearend with a similar competitor, comparing financial reporting and results with the competitor can be convincingly better.
Tax returns: In situations where a company is owned by a sole shareholder and director, they might find it easier to have the company’s accounting reference date end on the 31 March each year.
This might make tax planning and completing tax returns easier as they would just have to use one set of company accounts for the twelve-month period. This is opposed to having to split two sets of financial statements and apportion parts of each period to calculate their income for the year ending 5 April each year.
VAT returns: if you set up another company which is a part of a group the new company will become part of the group VAT scheme as well, having its accounting reference date coterminous with the other members might again make the task of preparing these returns simpler.
Tax Planning: If you want to buy a capital asset or pay a big lump of pension and you are just about to miss the company yearend and therefore the tax reliefs will go to a letter year. If, however you change the company yearend you can effectively put that tax relief in the current period and get a cash-flow advantage as well.
How to change a company yearend?
When changing the company year end, the first step is to complete the form AA01 and submit this to Companies House.
However, it’s important to note that the accounting date cannot be changed if the accounts are overdue so form AA01 must be received at Companies House within the allowable period for submitting your company’s accounts.
If you’d like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01214085132 or write to us at here.