A less apparent date is your accounting reference date? You might have heard of this date before and know when it is. Maybe you haven’t? Either way, did you know that your accounting reference date determines the deadlines for both the dates mentioned above? This makes it reasonably important to know what your accounting reference date is and when it is.
So, what is your accounting reference date? Why is it important? Can you change your accounting reference date? In this blog, we’ll look at all these questions in more detail.
What is the accounting reference date?
Every company in the UK must prepare a set of accounts that report on its income and activities for the past financial year. In turn, the new financial year starts on the day after the previous financial year has ended, or in the case of a new company, the date of incorporation. The last day of the previous financial year is referred to as the accounting reference date.
To illustrate the accounting reference date better, let's look at some simple examples. For instance, if a company's financial year runs from 1 March 2021 to 28 February 2022, the accounting reference date will be 28 February 2022.
For any new company, the position differs a bit. Here, the first accounting reference date is the last day of the month in the company's first anniversary month. For example, let's say a new company is incorporated on 15 June 2021. Its first accounting reference date will then be on 30 June 2022.
Why is the accounting reference date important?
At its core, the accounting reference date is important because this is the date you’ll use when you prepare your company’s annual accounts. In other words, in these accounts, you’ll include all transactions that took place before the accounting reference date.
Apart from this, your accounting reference date is also important because it affects the deadlines when you need to file your company’s annual accounts and corporation tax return.
Every company needs to file annual accounts with Companies House every year. For an existing company, these accounts must be filed within nine months from its accounting reference date. For example, if a company has an accounting reference date of 4 April, it will have until midnight on 4 January the following year to deliver its accounts to Companies House.
Here, it's important to remember that the above does not apply when a company's accounting reference date falls on the last day of the month. In this case, the company would need to file its accounts on the last day of the appropriate month. In other words, if a private company has an accounting reference date of 30 April it will have until midnight on 31 January the following year to deliver its accounts.
For new companies that need to file their first accounts and those first accounts cover a period of more than 12 months, the company must deliver their accounts to Companies House within 21 months from the date of incorporation or within three months from the accounting reference date, whichever is longer.
Here, it's important to note that, if the first accounts cover a period of 12 months or less, the normal rules as described above for account filing will apply. For example, if a new private company is incorporated on 1 January 2021, it will have an accounting reference date of 31 January 2022 and will have until midnight on 1 October 2022 to deliver its accounts to Companies House.
Also, keep in mind that these rules are only applicable for private companies and Limited Liability Partnerships.
For corporation tax, the deadlines differ slightly. Here, companies need to file their tax returns 12 months after their accounting reference date. For example, if a company has an accounting reference date of 31 January 2021, the company would need to file its tax return no later than 31 January 2022.
This deadline is applicable irrespective of whether it's a new company or an existing company. For example, if a new private company is incorporated on 1 February 2021, it will have an accounting reference date of 28 February 2022. The company would then need to file its tax return by no later than 28 February 2023.
Corporation tax comes with an additional deadline. Here, companies need to pay their taxes due within nine months and one day after their accounting reference date. So, for example, if a company’s accounting reference date is on 31 January 2021, it would need to pay its taxes by no later than 1 November 2021.
Can you change your accounting reference date?
Fortunately, you're able to change your accounting reference date to make your company's financial here longer or shorter than 12 months. Keep in mind, however, that you'll only be able to do this for your company's current financial year or the preceding financial year. For example, if you're currently in the 2021 financial year, you'll be able to shorten it for the 2021 financial year or the 2020 financial year.
Although you're able to shorten your company's financial year as many times as you like or prefer, your options are limited if you want to extend your company's financial year. Here, you'll only be able to lengthen your company's financial year to a maximum of 18 months. Moreover, you can only lengthen your company's financial year once every five years.
There are, however, some circumstances in which you will be able to lengthen the financial year of your company more than once every five years. This is the case when your company is in administration when you're aligning your accounting reference date to that of a subsidiary or parent company, or if you have special permission from Companies House.
You should also keep in mind that, when you change your company’s accounting reference date, it will also impact the other deadlines for filing your accounts. This, however, does not apply when you're lengthening your accounting reference date for your company's first financial year. Moreover, if you change your accounting reference date as described above, it will also affect your company’s accounting period for purposes of corporation tax.
When you want to change your company's accounting reference date, you'll be able to do so online through Companies House’s online service. You'll also be able to download and fill in the application form and forward it to the address on the form
What happens if I fail to file my accounts on time?
It's vital to remember the above deadlines as the HMRC charges penalties and interest in respect of late filing and payments. When it comes to the late filing of your company tax return, you'll pay a penalty of £100 if you file one day after the deadline. If you file three months or less after the deadline, you’ll have to pay another penalty of £100.
If you haven't filed your company tax return after the lapse of six months, the HMRC will estimate what you're due as corporation tax and add a penalty of 10% of the unpaid tax. Likewise, if you haven't paid in 12 months, the HMRC will add another 10% of any unpaid tax to your tax bill.
The same situation applies to the filing of your accounts at the Companies House. Here, if you file your accounts less than one month late, you'll have to pay a penalty of £150. If you file your accounts more than one month but not more than three months late, you'll need to pay a penalty of £375.
So, it’s clear that the longer the period, the more severe the penalties and it gets even worse. If you file your accounts more than three months but not more than six months late, you'll need to pay a penalty of £750 and if you file your accounts more than six months late, you'll need to pay a £1500 penalty.
Keep in mind, though, that these penalties are only applicable to private companies or Limited Liability Partnerships and for public companies the penalties or more severe.
The Bottom Line
If there’s one day you should remember when running your business, it’s your accounting reference date. When you remember this date, you’ll know when the deadlines are to file your annual accounts and tax returns. Fortunately, with the right accounting partner, this will never be a problem.
And that’s where Accountancy Cloud comes in. Our integrated tax planner makes it quick and simple to stay on top of your deadlines and makes it easy to prioritize your taxes with proactive alerts and health checks to ensure your business is performing at its best.
To learn more about Accountancy Cloud and how we can help you, get in touch to discuss your unique needs and requirements.
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