How Is Your Company’s Financial Year Determined?

If you currently own or plan to form a limited company, you have to understand your financial year. The financial year is simply the twelve month period that is reported in your annual accounts. These are the accounts that you file each year with Companies House and HMRC. The financial year is the specific period of time that is covered by your annual accounts.

A financial year is typically a twelve month long period, with the exception of your first year. During your first year of business, this year runs from the date that your company was formed until the end of the same month on the next year. This is known as your ARD or accounting reference date. Unless you actively change your ARD, this will be the specific date that your financial year will end every year.
Your ARD is the date that all of your annual accounts are made up to. Companies House will provide you with an ARD after you have incorporated your company. Your ARD will typically fall on your company’s formation anniversary date or the last day of the month of when you formed your company.

If your company was registered on May 15 for instance, then your ARD will be May 31 every year after that first year unless you change it. So, your financial year will be that twelve month period from June 1 until May 31 every year. You are required to deliver your accounts to Companies House every year by that date. Companies House issues a deadline for nine months after the end of your financial year. If your annual accounts are not received during this time, you will incur a hefty penalty.

If you want to change your ARD, you are permitted to do so only if your annual accounts are not currently overdue. You can shorten or lengthen your financial year. You are permitted to shorten the ARD by as many months as you want and you can do this as often as you like. You can only lengthen your financial year however one time every five years and you can only lengthen it to a maximum 18 month period from your current ARD.

If you do wish to change your companies accounting reference date, you do so through Companies House by filing Form AA01. You can also use a formation agent who can file this form for you for a small fee. Understand that any changes that you make to the ARD will ultimately affect the taxation accounting period for your company. You must inform HMRC if you are shortening your financial year and this must be done when you file your company’s tax return. If you plan to lengthen your ARD past the original twelve month period, you will need to file two company tax returns. One tax return will need to be filed for the first twelve month period and a second must be filed for the additional months that you have added to your financial year. Click here to learn more about setting up your own company

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