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Changing Length of Corporation Tax Period

Is it worth shortening a company accounting period?

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One of my clients (limited company) with a 31st May accounting date has asked whether it is worth changing his accounting period to match the tax year. So the next accounting period ending 31st May 2022 could be either shortened to 31st March 2022 or lengthened to 31st March 2023. I have never changed a company's accounting date before. If shortened as above cororation tax still due 9 months after period end date. If lengthened have to have 2 accounting periods; one for 1st 12 months (1st June 2021 to 31st May 2022 )and one for 10 months (1st June 2022 to 31st March 2023). Presumably dividends fall in the tax year of accounting period end date at the latest. I have never done this before so very interested in answers

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By Matrix
08th Jul 2021 17:38

I think it is more beneficial to have a period not aligned to the tax year. You can’t have a period of account longer than 18 months anyway. What do you or your client see as the benefits to shortening to March?

(You have to charge the same for a shorter period so a client would not normally choose this.)

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By Paul Crowley
08th Jul 2021 17:47

Shorten is best by far
There is meant to be a maximum stretch period of 18 months in total
Never tried to exceed it
Going beyond 12 months without the discipline of accounts, paying tax and regulating benefits and directors loan account does not sit right with me, and if you have not done it before there are little issues that can be forgotten.
EG there are 2 tax returns to file, 2 computations to prepare.
Once done you will not regret. Everything falls in line
Wages equal p60s, dividends on company equal the personal tax return

A young lady from here took a job at a much bigger local firm of accountants
They will only use 31 March year end for all trading.
Companies, LLPs, Partnerships, Sole traders, the whole lot,

I am now going the same way for trading concerns. No new daft dates and trying to get the old ones in line. Easier with companies than the rest as most now still on daft dates have tiny overlap relief compared with current value overlap period.

Overlap
I point out to clients that overlap is an interest free loan from HMRC that client does not realise that he is borrowing. Small bits each year

All repayable in one lump sum a year after client has ceased trading and run out of money
A particularly daft idea, only for the organised and aware
30 April was known as the usual Solicitors firm default trading year end

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By Paul Crowley
08th Jul 2021 20:28

Whatever you do agree the fees before you change the date.
On a stretch I would usually divide by 12 and multiply by number of months
Any reduction on a Shorten is in realty a favour to the client. Any time saving really is trivial and is at the bookkeeper point.
On both you need to do more work on credibility and logic checking than on a normal year at the top level

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RLI
By lionofludesch
08th Jul 2021 22:34

You can change the year end without much bother. Lengthening beyond 18 months is obviously a bit of a problem from both accounts and tax points of view. I'd generally go for shortening, tbh.

Your first question should be "why"?

What do you hope to achieve?

I'm also a bit concerned by your ambiguous comment about dividends. What do you mean by that?

Like Matrix, I like a year end that isn't aligned with the financial year. It gives you options.

This is basic stuff. [Moderated]

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By allan613
12th Jul 2021 09:46

Just throwing around an idea.
If all the companies have the same year end, does it not create unnecessary pressure in the office for accounts production.
Extremely busy part of the year, and 'twiddling your thumbs' during the rest of the year.

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RLI
By lionofludesch
12th Jul 2021 10:02

allan613 wrote:

Just throwing around an idea.
If all the companies have the same year end, does it not create unnecessary pressure in the office for accounts production.
Extremely busy part of the year, and 'twiddling your thumbs' during the rest of the year.

Accountants said that in the 1990s about self assessment. The truth is that some clients rush in with their books. Some leave it until the last minute. Work can be spread.

Having said that, I wouldn't like all the deadlines to be at Christmas. With or without the day shortening option which, it has been mooted, may not be available on the current terms forf much longer.

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By Paul Crowley
12th Jul 2021 10:07

I take it you do not have lots of clients.
March year end records will be ariving spread out MAY to DECEMBER
No different to Tax returns

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