Company Tax Returns - Changing Year End Date?

Mr_Taxtastic

Well that is true but I see no advantange in delaying the extension of the year end to March. In the following year you will still b extending your year end from Jan to March, so you will have to do two Returns which would both be due by 31 March and you would also have two different tax payment dates in that period as well. These were both things your accountant was trying to avoid which you would just be delaying for a year.

System

Thanks Mr Taxtastic, I was missing that point then. I thought the following year I would just have to make one tax return but it would still require two.

I may change it to March now in this case, the accountant did say they were happy to do this if it was what I wanted but also did say that if all their clients did this, they would not beable to cope. I've said I'd think about it over the weekend and get back to them..

I don't suppose there is two much additional work involved in preparing two tax returns is there, with regards to providing information from my part?

Pennywise

Just a few other considerations:-

1. Your accounts, when compared year to year, in say 2-3 years time won't be so easily comparable if you have short/long periods whereas if each set of accounts was for a 12 month period, it would make comparisons far more easier and obvious. This may or not be important - it could help if you were giving your accounts to suppliers for credit facilities or to the banks for loans, or a personal mortgage, etc. Anything that makes life easier is surely better?

2. If you may be caught by IR35, a year end of 31 March, or even 5 April is beneficial when getting corporation tax deductions for the "deemed payment".

3. Although not relevant at the moment, it's not so long ago that we had special tax rules charging corporation tax based on dividends paid during a company year as well as profits made in that year. Having a company year end a month or two before the tax year end was highly beneficial at that time because a dividend could be paid just after the company year end (so tax delayed by a year) but within the current tax year end (to make use of basic rate band), so there was a valuable timing difference.

4. You can only extend a company accounting period once in every five years. If you do it now, for no good reason, you won't be able to do it again next year or the year after, if after a change in legislation, a "good" reason becomes apparent!

Re points 2 and 3, there are clearly going to be tax hikes announced relatively soon to help chip away at the country's debt levels. Whichever Govt will find it hard to increase basic rate tax for everyone nor corporation tax main rates, so they'll almost certainly look to chip away at other areas where fewer people are affected and the headlines won't be quite so bad. One are ripe for tax hikes are small limited companies where dividends are paid instead of a market salary, hence no NICs - they'll either try to "beef up" IR35 to extend its scope or bring in some changes in dividend taxation.

If you were my client, I'd be wanting you to leave things as they stand unless and until a good compelling reason arose to change the year end. In the past, when a year end has been changed, I've know clients to have suffered detrimentally because they couldn't change the year end again when legislation has changed - hence my comments re points 2 and 3 above, for which for most of my clients, I could advise a year end change to reduce tax but for those that had already done it, I couldn't.

System

Thank you Pennywise, there is alot for me to think about in your email.

I have no other reason for wanting to change the year end date other than to tie it in with the personal tax return date of 5th April.

The only reason my accountants wanted to reduce the year end date was because they said it would be better to have it as 31st January as company was opened in Mid March.

Would I be better to just shorten it as they have advised, and leave it as this for now. They did say it's quite common to round the date up to the nearest month.

Point one wouldn't be something I need to consider as I wouldn't use accounts for those purposes described.

I just wanted to make sure I did the best thing for the company.

Thanks for all your asistance..

Mr_Taxtastic

Just regarding not being able to extend the year end in the future if you go with a long accounting period, there would be nothing stopping you shortening the period in the future. A March year end can easily be changed to Jan/Feb year end if the tax rules change.

I would just go with what is best for you and fits with your timetable, and if it was me as a one man owner managed business, I would go for a Feb or March year end.

If you started Mid March, why not have a Feb year end or, be unusual and have a mid March year end? This way you are almost working on the personal tax year and there would not be a long accounting period.

System

The actual date the company was started was mid-Feb. I am drawn to the idea of having a year end of March to tie in with the personal tax return.

Would this mean my accountants would have to prepare two sets of accounts, or just a couple of extra pages of the extra data for Feb/March during the first year.

Mr_Taxtastic

No extra work from an accounts point of view, it is still one set of accounts and no extra pages for long periods. The dates of the accounts are just longer.

KPR11

Both Mr Taxtastic and Pennywise have valid point. Your accountant is just trying to feed you a whole load of BS cause a lot of his OMBs will March year end and as such wants to spread his workload.

You have to weigh up the scales and make a decision!

System

From my point of view having a date of end March will be easier as the info for the P11D etc will be there available from one set of accounts.

When I had my previous company I used to have to dig out last years accounts and add up the two which is a little extra work.

What I'm considering this year aswell is to look at an old P11D and see what breakdown of info they ask for and then track it in seperate columns on my bookkeeping spreadsheet and this way when the time comes I can easily just add up the info.

Thanks again for your advise it's been invaluable. I think I have plenty of time to submit a form for extending the date.

Now I just need to get my hands on a good bookkeeping spreadsheet template! The one thing SJD did was have a good spreadsheet for this, my new accountant has a very basic one. I will try to adapt one if I can figure out the formulas etc!

System

If I was your client and was wanting a March end date, would you want to charge me more for this as I'm on a monthly fee with them if that makes sense?

The Corp Tax Return is included in this, however I'm not sure that adding a couple of months to the end for extra return is too tricky is it?