Company Tax Returns - Changing Year End Date?

Legacy_user

Hi, I have opened a limited company during mid-Feb however my accountants have advised to change the year end to January as they said "The accounting period is normally adjusted so that only one company tax return needs to be filed in the first year."

Is this the best way to proceed?

Mr_Taxtastic

My response would be that the accountant is trying to avoid the extra work of a long period of account. I would suspect this is because they complete the Return manually, as it is does not create much extra work if using tax software.

I would advise the client to use what ever year end suited them. If you want a Feb year end, say so. A lot of owner managed clients use 31 March year end as it allows for the easy tie in with the directors personal Tax Return, P11ds and payroll.

System

Thanks Mr Taxtastic, this is what I thought the reason was also but didn't want to jump to any conclusions.

I was happy for them to change the date to January if it was beneficial to me but I couldn't see any hence wanted to look into it a little first. They didn't point this out to me as such or explain it but slipped the form in for me to sign along with many other documents which required my signature re the opening of the company and my agreement with them.

Would I be better off requesting that they extend the date instead to 31st March to tie in with Tax Returns, P11ds, payroll etc? Or is it worth leaving it as is in case I ever need to close it down. I'm not sure how many times you are allowed to change the date.

On another note they've also got a clause to say I am tied in with them for a minimum of 12 months, again they did not point this out to me to start with. I am on a monthly fee which includes certain services inc year end report

Mr_Taxtastic

If it was me, and the company is a small owner managed business, I would use a 31 March year end. This would mean that all the details of dividends and Directors Remuneration in the accounts can be easily transferred to the personal Tax Return.

If your accountant is preparing your personal Tax Return it will mean they have to request less information from you as all your income from the company will be in the accounts (also puts the burden on them to get it all right). If you have say a December year end, they will need to ask you for dividend details for Jan-5 April, which many many clients get wrong for various reasons (puts part of the burden on you).

If you are preparing your own personal Return, I would defiantly go with a March year end unless you do really know what you are doing.

There are restrictions on the extension of accounting periods but I would not let this stop me choosing a year end I was happy with.

Your accountant may not want you to use a March year end, as I expect 50% of the existing clients will have March year ends as well (workflow issue for them).

Re 12m contract, I would not like this personally as you may not get on with them, trust them or find the service satisfactory. This I guess is essentially the price you pay for fixed cost and monthly instalments, although I feel other practitioners would offer this without an 12 month tie in.

At the end of the day it is entirely your choice of year end so chose what fits best with your personal schedule. A year end near the summer holidays perhaps so you can spend holiday time doing the books rather than enjoying the sun J.

System

Thanks again Mr Taxtastic, so it's more beneficial to go with a end March year end than the actual 5th April date?

This has been really helpful. In previous years it has proved time consuming to do year end and then tax return due to different dates so would most certainly suit me.

With regards to 12 month tie in, I've asked several times for quotes and a breakdown of exactly what this includes and a 12 month tie in was never mentioned. I will go back and ask this question as I'd be interested to know why it wasn't.

Other companies such as SJD don't do this and I did look at Nixon William
http://www.nixonwilliams.com/

Decided to go with a more local smaller firm...

System

The reply regarding the end date was that this would mean two corporation tax returns would need to be prepared and I would have to make two separate payments at different dates. They said they are tring to avoid this by adjusting the tear end accordingly??

Mr_Taxtastic

Summer01 wrote: »

The reply regarding the end date was that this would mean two corporation tax returns would need to be prepared and I would have to make two separate payments at different dates. They said they are tring to avoid this by adjusting the tear end accordingly??

Would you deem this to be a major hassle for you, making two payments is not difficult and and it will only be on this one occasion where you have a long period. They seem very reluctant to let you have a long AP which probably means it is the hassle for them they do not want. (Preparing two Returns, two comps and advising you of two payments).

Re 31 March / 5 April, there is no real difference as very little can happen in 5 days if you do not need it to. I would say 31 March is eaiser to use for your own book keeping purposes, deadlines etc.

I noticed Nixon William are management accountants and not what I call the more traditonal Chartered Accountants (ACA, ACCA, CA). This may be what you are after however, I thought I would point it out so you aware of who you may be dealing with and which professional bodies/rules etc apply.

System

Thanks for your advice, much appreciated.

Having giving it further thought I think it would be beneficial for me to have an end March date. I understand that it would mean more work at that period for the first returns but after that it should be much easier. When I had my last Limited Company which is now closed the year end was Sept and it was trickier tying up the figures as you have to refer to two years of accounts, rather than just the one. It would definately be easier if the dates tied in.

With regards to the year tie in they said that they are offering a discount for the monthly payments and they've had clients defer on payments previously so they are being careful to avoid this going forward..

Mr_Taxtastic

Good luck and I hope it all goes well.

System

Thank you.

I have just realised that the personal tax return maybe something I can complete myself - it's worth me investigating if I can carry this out myself and save myself £214 a year.

System

I've had a long chat with my accountant and they have said that if I extend the date to March then I would have to complete two returns

Thinking about this, would I be better off letting the date be shortened to January for this year, and then from next year extend it to March.

This way if I am thinking correctly, I would only have to do one return this year, and then the next return would not be required until the following March - I think this would be the best option unless I am missing something important...