Accounting Periods for Companies

By: In2Accounting

What is an Accounting Period?

An accounting period is a period of time ending on your company’s financial year. It is usually around 12 months. It is an important date  for every Limited Company, because it decides your deadlines relating to corporation tax and annual accounts.

The tricky part about the Accounting Period, is that Companies House and HMRC have different requirements for your Accounting Period.

 

The Significance of an Accounting Period

The accounting period your company choose has an impact on your deadlines and the manner in which you which prepare your returns to both Companies House and HMRC.

It affects: 

  • The deadline for your Annual Accounts to be submitted to Companies House
  • The deadline for your Corporation Tax Payment to reach HMRC
  • The deadline for your Corporation Tax Return to reach HMRC

So it is an important date and one which requires  planning and consideration when you form a company, or if you decide to change your Company Accounting Period.

 

Your First Accounting Period

When you first incorporate your company, Companies House and HMRC will automatically issue you with your Accounting Year End (Also known as your Accounting Reference Date).

It will span a period between the date you incorporated your company and your Accounting Reference Date. It is likely to be more than 12 months due to the manner in which Companies House automatically generates your Accounting Reference Date.

 

Accounting Period for Companies House

  • It can be more than 12 months
  • It can be less than 12 months
  • The end of your accounting period is known as your Accounting Reference Date/Year End/Financial Year End
  • Your Company Accounts will be prepared based on all financial information within this period.

For example, if your accounting period is from the 1 January 2014 to 31 January 2015(13 months), all the transactions you entered into during these  dates would be summarised to create your annual accounts. The Annual Accounts include your Profit and Loss statement, Balance Sheet, Statement of Capital and Notes to the accounts.

 

Accounting Period for HMRC 

  • It can be less than 12 months
  • It CANNOT be more than 12 months
  • It is determined by your Accounting Year End date

The end of your accounting period or your accounting year end will determine when your Corporation Tax Return and Corporation Tax Payment is Due to be submitted to HMRC.

 

The Tricky Bit

If you prepared your Annual Accounts for a period greater than 12 months (ie in the example above it is 13 months) You need to submit 2 separate Corporation Returns, following the example above: 

  • The first Tax Return covering 12 months (1 Jan 2014 to 31 Dec 2014)
  • The second Tax Return covering 1 month (1 Jan 2015 to 31 Jan 2015)

If your Accounting Period is actually less than or equal to 12 months, you will have only 1 corporation tax return as normal.

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