Our experts take you through accounting periods and how they apply when dealing with Corporation Tax
At DSR Tax Refunds Ltd, we know that setting up a business is hard work, especially when you have to deal with the financial and tax side of business. That’s why our experts want to help make life as easy as possible for you by sharing our specialist knowledge with you. So, whether you are wanting more information about VAT or need to know how to register as a limited company, our handy guides are here to help. All our information is based on HMRC sources, so you can rest assured that these guides are filled with helpful and accurate information.
What are accounting periods?
When dealing with Corporation Tax, your ‘accounting period’ is classed as the time covered by your Company Tax Return (the tax return sent by your company or association, not your personal Self Assessment tax return).
An accounting period can’t be longer than 12 months and is usually the same as your company’s financial year (the year covered by your company’s annual accounts). It is possible that it will be shorter than 12 months in the year that you set your company up – for example, if you set your company up in July and your financial year runs in line with the tax year, your initial accounting period will run from July to the following April 5th.
Your accounting period is important for a number of reasons, not least because it determines the deadline for paying Corporation Tax and filing your Company Tax Return. The deadline for sending your Company Tax Return needs is 12 months after the end of the accounting period it covers. If you miss that deadline, you will face a HMRC penalty. Corporation Tax must be paid 9 months and one day after the end of your accounting period.
How do you check your accounting period?
You can sign in to your business tax account using HMRC’s online services and you can check important information about your company’s financial information held with HMRC.
For your first accounting period, HMRC send you a letter detailing your dates for your accounting period once you have registered your company for Corporation Tax. If you think HMRC have got the dates wrong, you need to inform them as soon as possible so they can amend the information they hold about your company in a timely manner.
What happens if your accounting period is different to your financial year?
There are occasions when your accounting period and your financial year may differ. Maybe you are in your first year of business or you have ceased trading in the middle of a tax year. You might have restarted your business midway through your financial year.
There are occasions when your accounts might cover more than 12 months, because you have had to lengthen your company year. Your accounts might cover less than 12 months because you have closed your company or had cause to shorten its year. In these cases, your accounting period will also differ from your financial year.
If your accounts cover more than 12 months: you are required by HMRC to file 2 returns because your accounting period cannot be longer than 12 months even if your accounts are.
If your accounts cover less than 12 months: your accounting period will normally end on the same day so will also be shorter than 12 months so it should not make too much of a difference to the filing of your tax return to HMRC.
If you file online using HMRC’s online service, you will need to contact HMRC to update your accounting period dates prior to sending your tax return. If you use accounting software instead, you must enter the new dates for your accounting period before sending your return to ensure that the correct information is sent to HMRC.
How can DSR Tax Refunds Ltd help?
We know that setting up a new business can be really complex – there’s so much to think about and that’s before you start thinking about tax. Our friendly team of tax specialists at DSR Tax Refunds Ltd are on hand to help make life easier for you. We’re the experts at identifying your maximum allowable expenses so call us on 0330 122 9972 – we’re the tax experts you can trust.