Longer or shorter company accounting periods

Companies often have to contend with having two different company accounting periods. This is because there are different rules for Companies House filings and submissions to HMRC, for corporation tax purposes.

The accounting periods can be the same but can also differ and a change may need to be made to ‘sync’ the accounting periods. As a general rule, the Companies House rules are more flexible and under certain circumstances it is possible to make a change to the year end. The Companies House accounting period can sometimes run for more or less than 12 months.

A tax accounting period for corporation tax purposes cannot be longer than 12 months. This can create the slightly unusual scenario where companies will be required to file 2 returns with HMRC because their accounting period can’t be longer than 12 months.

If your accounts cover less than 12 months then your accounting period will normally end on the same day, so will also be shorter than 12 months. This can happen if the company stops trading or shortens its company’s year-end also known as its accounting reference date.

Planning note

Extending or shortening an accounting period for corporation tax purposes can be a useful tax planning device. For example, an accounting period could be extended to draw in tax losses and obtain the cash flow benefits of the losses at an earlier date.

Source: HM Revenue & Customs | 20-12-2017