In short, yes you can. The current rules are as follows:
- You can shorten the accounting year by as little as one day, for example from 31st March to 30th March. There is currently no limit to the number of times you can shorten your company’s financial year (although it is suspected that this may change in the future).
- You can typically lengthen your company’s year up to a maximum of 18 months. The number of times you can lengthen the year is generally restricted to once every 5 years, with a few exceptions, for example when the company is in administration.
A few points to note are that you can only change the year end date for the current or previous financial year, and you cannot change the year end date if your accounts are overdue for filing at Companies House.
Changing the year end will change the deadline for filing accounts.
The company directors may consider the following factors in order to determine the most suitable accounting year end for the business:
- Is the business seasonal?
Timing the accounting year end date to fall at the end of the business’ busy period should in theory maximise the business’ cash and debtor balances, improving liquidity and therefore the company’s credit rating.
However, timing the accounting year end at a less busy time gives a small business owner more time to focus on the requirements for the year end and can make some aspects much easier, for example holding less stock will result in a simpler and quicker stock count.
- Are there tax implications?
The corporation tax payment deadline is 9 months and 1 day after the end of the accounting period. Changing the accounting year will also affect the period the corporation tax liability is calculated on. Tax can, therefore, be a significant factor in determining the best time to end the accounting year. It is best to speak to your tax adviser to help understand the tax implications of any change of accounting year end date.
- Are there any external requirements?
The business may have stakeholders who require the accounts to be completed to a certain year end date. In this case, the business will need to adhere to these requirements.
- Do I need my company accounts completed and filed within a very short time period?
A significant majority of companies have either a 31st December or 31st March year end. Choosing a year end at a different point in the year, for example 30th September or 31st October can therefore take advantage of your accountant’s increased capacity at this time of year.
Form AA01 ‘Change of accounting reference date’ must be completed in order to make the change at Companies House.
If you need help with this, or with other advice, then please get in touch with our accounting team.