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Corporation tax accounting periods

New incorporations

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New company incorporated, say, today 11th May. Companies houser will determine the financial year end to be 31st May 2022 and annually thereafter.

HMRC on the other hand assume a twelve month period from incorporation to 10th May 2022 followed by a short period from 11th until 31st May 2022.

I note that the new gov.uk incorporation service now allows you to provide a future date for commencement and I had hoped that if you entered eg. the first date of following month HMRC would then assume 12 monthly periods from that date. Alas no. I incorporated a company using this service on 5th March 2021 and another on 15th, both with trading start dates of 1st April. For both companies, the first accounting period runs as expected to 31st March 2022 but then followed by a short period ending 30th April 2022 then annually to 30th April thereafter.

Anyone have any idea what I am doing wrong? Pre-Covid I would get on the phone and get the accounting period fixed for each new incorporation, but with Covid the waiting times are insane. I am hoping there may be a better way!

Replies (20)

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RLI
By lionofludesch
11th May 2021 09:50

They don't assume that. Them's the rules. A CT period ends after 12 months (or when one of a number of other events happens).

You can avoid the two period thing by changing the year end from default to, say, 30th April. You have a free choice. Entirely up to you and the client.

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Replying to lionofludesch:
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By bettybobbymeggie
11th May 2021 10:03

That's the frustration - getting through to them (webchat/phone) at the minute is a nightmare. Would you write instead? Seems mad that we have descended to the dark ages.

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Replying to bettybobbymeggie:
RLI
By lionofludesch
11th May 2021 10:18

bettybobbymeggie wrote:

That's the frustration - getting through to them (webchat/phone) at the minute is a nightmare. Would you write instead? Seems mad that we have descended to the dark ages.

In this case no. But I haven't rung HMRC for years. Why wait for an hour to speak to someone who, more likely than not, can't help you ?

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blue sheep
By Nigel Henshaw
11th May 2021 09:51

you dont need to do anything, just file the Ct600 and HMRC will fall in line

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Replying to NH:
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By bettybobbymeggie
11th May 2021 10:00

I had always understood that the CT600 would be rejected if the accounting period dates didn't match what HMRC had. But I guess you are saying that, for the examples given above, if I file their first CT600 for the year to 31 March 2022 that will prompt HMRC to fix the dates for subsequent periods?

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Replying to bettybobbymeggie:
blue sheep
By Nigel Henshaw
11th May 2021 10:12

bettybobbymeggie wrote:

I had always understood that the CT600 would be rejected if the accounting period dates didn't match what HMRC had. But I guess you are saying that, for the examples given above, if I file their first CT600 for the year to 31 March 2022 that will prompt HMRC to fix the dates for subsequent periods?

Correct, HMRC will process whatever dates you file, you might find after the event that they will not clean it up and you might have an open period but they usually sort that out themselves eventually

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Replying to NH:
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By bettybobbymeggie
11th May 2021 10:23

Thanks very much - I never new that.

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Replying to bettybobbymeggie:
RLI
By lionofludesch
11th May 2021 10:15

bettybobbymeggie wrote:

I had always understood that the CT600 would be rejected if the accounting period dates didn't match what HMRC had. But I guess you are saying that, for the examples given above, if I file their first CT600 for the year to 31 March 2022 that will prompt HMRC to fix the dates for subsequent periods?

No, you're wrong. Just file. You tell HMRC by filing a return, not by wasting your time on the phone. Even if HMRC don't "fix" it, just keep filing the correct dates.

I've always thought that the twelve and a bit month thing could have been fixed so easily if Cos House had a default ARD set at eleven and a bit months instead of twelve and a bit. But that would've required joined up thinking.

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Replying to lionofludesch:
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By bettybobbymeggie
11th May 2021 10:35

I've seen the light and I can tick three things off my to-do list. Thanks!

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Replying to lionofludesch:
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By SXGuy
11th May 2021 12:08

I did just that, filed the dates i believed to be correct, then a year down the line, received late filing penalties for the periods hmrc expected.

However i resolved it by writing back, confirming the periods that were submitted along with the IRMarks, and they were happy and cancelled the penalties.

So just be warned that may happen.

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By Duggimon
11th May 2021 10:26

Our usual process is to do the first set of accounts then file two or three returns for it. The first return will usually be for the non-trading period from incorporation to start of trading, then for the first twelve months or to the year end, if shorter, then, if needed, a third return up to the ARD.

Then HMRC issue a penalty for the first return being late and we write to them pointing out it's for a non-trading period and so no penalty is due, then they withdraw it.

I'm not actually sure what would happen if we didn't file the non-trading period but I've not tried it to find out.

In all cases we ignore whatever HMRC thinks the periods are, and they adjust accordingly.

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Replying to Duggimon:
RLI
By lionofludesch
11th May 2021 17:46

Duggimon wrote:

Then HMRC issue a penalty for the first return being late and we write to them pointing out it's for a non-trading period and so no penalty is due, then they withdraw it.

The twelve months runs from the end of the period of account, not the CT accounting period.

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By turchyna582
11th May 2021 11:29

In the examples you gave, with 5th and 15th March as incorporation dates, but trading start date of 1 April: why not simply shorten the first periods to end 31 March 2021 (during which of course the Companies were dormant).
I have successfully done this many times - it is easier than apportioning/matching the future trading periods
Each successive year would then be 1 April to 31 March.

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ALISK
By atleastisoundknowledgable...
11th May 2021 17:32

Maybe a stupid question, but why don’t you just file the 12 months, file the 1/2 month and then you’re back on track and everyone’s happy? How much extra time can the 2nd CT600 take on integrated software? 10 mins? 20 mins? Even 30 mins will be less time than writing to HMRC to appeal a fine.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
11th May 2021 18:00

Technically (or 'strictly' to borrow a word from cathygrimmer), a company should tell HMRC it's become chargeable (s55 FA2004). I should imagine that so notifying would avoid the penalty situation in the first place. (You might regard HMRC as being lenient for not enforcing failure to notify penalties.)

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
12th May 2021 09:19

I don’t disagree, but again, how long will that take, compared to just doing the second return?

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By Tax Dragon
13th May 2021 07:12

Does it take any longer to do it right? Why do some Awebbers seem to have so little regard for doing things right? Client can (and probably should) do it themselves anyway (so no time cost to you) via the gateway - https://www.gov.uk/guidance/corporation-tax-trading-and-non-trading#:~:t....

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Replying to Tax Dragon:
blue sheep
By Nigel Henshaw
13th May 2021 07:32

Tax Dragon wrote:

Does it take any longer to do it right? Why do some Awebbers seem to have so little regard for doing things right? Client can (and probably should) do it themselves anyway (so no time cost to you) via the gateway

Because when you deal with HMRC day in day out you quickly learn to find the quickest and easiest option to get the correct figures filed which might not always be the strictly correct way of doing it
Because when you deal with small businesses day in day out you quickly learn that
asking them to do anything like you suggest will a) be very unlikely to be done b) probably be done incorrectly and c) it would take you longer to explain to them how to do it than to do it yourself
So all in all, yes I will carry on doing it the way that works and saves time

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Replying to Tax Dragon:
RLI
By lionofludesch
13th May 2021 08:36

Tax Dragon wrote:

Does it take any longer to do it right? Why do some Awebbers seem to have so little regard for doing things right?

Yes, it does take longer.

We probably take our cue from HMRC. It's laughable to imply that HMRC will read a letter telling them that trading has started. Even more laughable to imply that they would act upon it.

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Replying to lionofludesch:
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By Tax Dragon
13th May 2021 09:14

That's why HMRC themselves say to do it via the gateway.

And @NH - businessfolk of the type you describe probably should not operate via companies.

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