Changing company accounting periods

The standard formation method is through Companies House WebFiling or Company Formation Agent (although paper filings are still allowed) (although paper submissions are still accepted). If incorporated through WebFiling, there is the further advantage of HMRC immediately being informed by Companies House when a new company has been created. HMRC will next usually send a ‘Notice to submit a tax return’ specifying the reporting date of the first accounts. Notification usually corresponds to an accounting period filed with a corresponding tax return.

The initial accounting period frequently lasts for more than a year since the beginning date is the date of incorporation. The ending date is the “accounting reference date,” i.e. the last day of the month the company was formed. In the years that followed, the accounting reference date will generally cover the company’s financial year. Read below to know about the benefits of changing company accounting periods.

Shortening the accounting period

The ‘accounting period’ for Corporation Tax cannot be longer than 12 months. This is because a tax return must cover 12 months. Two tax returns may have to be submitted to cover the first accounting period and two payment deadlines. In the years to come, just one return will be required, generally covering the same financial year as the financial accounts. The filing of two tax returns for only a few weeks (often days) might be more accessible by applying to shorten the accounting period to the end of the month beforehand. As a result,  just one set of financial statements, one tax return, and one tax payment is needed for the period.  A penalty of £150 is charged automatically for any accounts submitted to Companies House beyond their due date. It is very uncommon for an appeal of this nature to be successful. Of course, avoiding a penalty is submitting the accounts on time. It is possible to avoid penalties by (changing company accounting periods) shortening the accounting reference date and obtaining three more months to offer if you cannot meet the deadline. When the accounting reference date is shortened, the new deadline for submitting accounts at Companies House becomes the longer of:

• nine months from the new accounting reference date; or
• three months from the date of receipt of the application form AA01 

Therefore if the accounting reference date is shortened by only one day, that gets an additional three months in time to submit the accounts. In addition, the regulations enable accounts to be prepared up to seven days on each side of the accounting reference date; thus, these accounts may be filed as prepared with no revisions required.

Notably, the modification to the AA01 form must be received by Companies House before the day that the accounts are due originally, and this approach cannot be utilised if the filing deadline has passed.