Retailer accounting year end

Retailer accounting year end

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Somebody has said that retailers often have a nov / dec year end.
Is this correct and if so why?
I was thinking of a 5th April (sole trader) year end to agree to the tax year.
Roger

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By aj_cook
04th Dec 2006 12:49

31st Jan is common
A number of my retail clients opt for a 31 Jan year end to coincide with the end of the 'January' sales. I believe John Lewis do the same.

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By fraserjopp
04th Dec 2006 11:10

Season's Greetings
It's because they do a disproportionately large part of their trading in December. So if you want to delay tax on this, a Nov year end will mean the sales are reported as late as possible. On the other hand, if you want to show a profit sooner (maybe to pay dividends, impress the bank, or increase the value of the business), you could choose 31 Dec. Also stock holding should (in theory) be lowest post Christmas, reducing stock count time.

Hope this helps

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By User deleted
04th Dec 2006 19:26

Stocktaking
The biggest bind, accounting wise, for many a retailer is stocktaking.

So, choose a time of year when stock levels will be seasonally low.

Alternatively a time of year when sales are at a low level should enable adequate staff resources to be available.

The above are NOT tax reasons for choosing a particulare FYE but rather practical issues.

Turning to the tax issue for non-limited-companies I still favour a 30 April FYE as it enables a forecast of future tax liabilities further into the future. As an example if I've just finalised the 30 April 2006 accounts I can give a good idea of the 31 January 2008 and 31 July 2008 tax liabilities for that retailer. The 31 March 2006 accounts tell me the 31 January 2007 and 31 July 2007 tax liabilities. So, from a cashflow planning viewpoint 30 April is the winner, only to be criticised on the grounds of what happens when a partner leaves or a business ceases, or the profits fall.

If profits fall the 30 April FYE trader has to wait longer for the effect to be felt on his tax return. Conversely the 30 April FYE trader, experiencing increased profits, pays the tax on those higher profits sooner.

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