Hi - Being a humble 'book keeper' I would be grateful for a 'practical steer' on this please.
Customer of mine was in p'ship which had a yr end date of January, the pship ceased September 12 & cessation accounts have been prepared.
I took the opportunity to move the year end to March (having read that I did no need to seek permission).
The sole trader is now looking to incorporate and we have had various dicussions with Accountant about how best to achieve that & in the course of these conversations the Accountant advised me that you can't just change year end date without permission from the Inspector. I didn't argue the point with Accountant at the time but have since read again that all one is required to do is annotate the return regarding the change in year end date and rationale behind it which is effectively a 'housekeeping' thing and has nothing to do with any capital purchases or anything else.
I'd be grateful for opinion on how I should progress this (with the Accountant) as I'm being asked now for figs to year end Jan 13 when I have prepared them to Mar 13 & using SAGE instant I cannot change the year end date myself - although i understand I could pay to have this done.
Thanks in anticipation.
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Practicalities
From a tax point of view the first thing to decide is if there was actually a cessation at all for your customer.
Did the trade cease completely or was it just carried on by your customer on their own? If the trade continued then you need to fulfill certain criteria to be able to change the accounting date. You do not need permission from HMRC but I would have expected you to talk to client and accountant first as you do need to be sure it is in the clients best interests.
Changing the year end is not something to do for convenience. If you run accounts through to 31 March they would be taxed in one year on the profits earned from 1 February 2012, the day after the end of the previous accounting period, to 31 March 2013 - 14 months. That is fine if there are falling profits or large capital allowance claims but if profits are rising then it could be unnecessarily detrimental.
Can you supply the accountant who will need to do some number crunching with management account figures for
1. February and March 2013 so he can compare normal basis of assessment with:
2. Management accounts from 1 April 2013 to date
3. Details of any asset movements throughout.
If the sole trade ...
... is the same trade as the partnership, it is not a cessation, the outgoing partner will be able to be taxed on the short period but the continuing partner carries on as before.
HMRC will not have a problem with moving to a 31st March year end as they prefer it, it makes things simler - am looking at doing this my self for an October year end trade who has got in a right pickle with his tax.
What you will have though is as stated above a 14 month period, but you will also have overlap relief to off-set this. I assume the original partnership started on a 1st February and the first accounts were done on a 12 moth period. If so the initial 1st February to 31st March will have been taxed twice on the opening year rules and yo will get relief for these two months if you chnage year end - if you do not have this information HMRC are usually quite good at providing it.