Whether you’re looking to changing your company’s year ends with Companies House or if you want to shorten it, there are benefits to be enjoyed from changing your accounting date.
Before you start, the first thing to note is that the maximum length for a company’s accounting period is generally 18 months.
You can shorten your company’s accounting period as many times as you wish but you can only extend it once every five years. So, if you are thinking of lengthening your accounting period, it’s important to have a good reason for doing so.
Benefits of changing your company’s year ends
With the ongoing pandemic in mind, businesses of all types are likely to be recording losses or at the very least reduced profits. In general, where companies have made a profit in the most recently completed period, there are likely to be tax liabilities. Extending the accounting period will bring the loss-making phase into the same term as that with profits.
Small businesses and sole traders can experience benefits to cash flow through changing the accounting period, although this will have been affected to some extent by the Government’s deferral of self-assessment payments last year.
Deferring a tax payment
If your profits are falling, you can extend your year end, this has the effect of bringing the average profits down over a period. This can reduce the tax liability tax liabilities that may be due for the 12 month period.
Equally, you can revert to your original accounting date once profits are rising again by bringing the date forward.
Missing the deadline for filing your accounts with Companies House can lead to some serious financial penalties. By extending your accounting date, you will find you have more time to file your returns, helping you to avoid a fine.
Aligning your businesses
If your business is part of a group, it may be beneficial from an administration point of view to align all your companies’ year ends.
Too busy for tax
It may be that your year end currently falls within a busy time – for example, over the Christmas period. Businesses in sectors such as retail or hospitality would be wise to avoid a year end that falls within late November and mid-January as this will traditionally be your busiest time, when you and your staff are tied up with customers or with stock taking.
How do you go about changing your company’s year ends?
When changing your year end, you must complete a AAO1 form and submit it to Companies House. You cannot change your year end if your accounts are overdue, so the form must be received at Companies House within the allotted time for submitting your accounts.
Changes can be made online faster than submitting a paper form, so if you need to, contact Companies House digitally.
If you’re unsure whether changing your year end will help your business, get in touch with our team.