Running a business comes with many responsibilities, and keeping accurate financial records is one of the most important. For limited companies, part of this involves understanding the accounting reference date (ARD), which usually marks the end of the company’s financial year. The ARD affects annual accounts, filing deadlines and, in many cases, the company’s Corporation Tax accounting periods.
This guide explains what an accounting reference date is, why it matters and what to consider if you want to change your company’s year-end.
What Is an Accounting Reference Date (ARD)?
The accounting reference date (ARD) is the date that marks the end of your company’s financial year. It determines the period for which your company must prepare statutory financial statements, also known as annual accounts. For most companies, the ARD is automatically set at the end of the month of incorporation. For example, if your company was incorporated on 15th March 2024, your ARD would be 31st March 2025.
Companies House usually sets the first ARD as the last day of the month in which the first anniversary of incorporation falls.
Your ARD affects the period covered by your annual accounts and the deadline for filing those accounts with Companies House. It will also normally affect your Corporation Tax accounting period and the related HMRC deadlines.
The Accounting Reference Date is governed by rules set out by Companies House under the Companies Act 2006. Corporation tax obligations linked to your accounting period are administered by HM Revenue & Customs.
Why Is the ARD Important?
The ARD impacts several areas of your business, including:
Key Areas Influenced by ARD
- Compliance Deadlines: Annual accounts must be filed with Companies House based on the company’s financial year and applicable filing deadline.
- Corporation Tax: Your accounting reference date will normally affect your Corporation Tax accounting period and related HMRC deadlines.
- Strategic Planning: Aligning your financial year with your business cycle can make financial reporting and performance analysis easier to manage.
Missing the relevant accounts filing deadline can result in automatic late filing penalties from Companies House.
Private limited companies normally have 9 months after the end of their financial year to file annual accounts with Companies House. A Company Tax Return is normally due 12 months after the end of the Corporation Tax accounting period, while Corporation Tax is usually payable 9 months and 1 day after that accounting period ends.
Can You Change Your Accounting Reference Date?
Yes. A company can change its current financial year or the immediately previous one by changing its accounting reference date. However, the change must be made before the relevant accounts become overdue.
Reasons to Adjust Your Financial Year
- Align with the calendar year: Match the financial year with the calendar year or a parent company’s reporting schedule.
- Simplify during transitions: Ease accounting during mergers, expansions, or other significant business changes.
- Seasonal trends: Match your financial year to seasonal business trends for better performance analysis.
How to Change Your Company’s Year-End
Changing your company’s year-end involves notifying Companies House of the new ARD. Here’s a step-by-step guide:
1. Decide on the New ARD
Before making changes, choose a date that aligns with your business’s strategic needs. Consider how the new ARD could affect your accounts filing deadline, Corporation Tax accounting periods, reporting processes and wider business cycle.
2. File the Change with Companies House
You can change your accounting reference date online through Companies House, through suitable software, or by post using form AA01. The change must be made before the filing deadline for the accounting period you want to change.
3. Understand the Restrictions
While you can extend your accounting period to a maximum of 18 months, certain restrictions apply:
Important Rules for Adjusting Accounting Periods
- Extension limits: You can normally lengthen a financial year to a maximum of 18 months and usually only once every five years. Exceptions can apply where the company is in administration, is aligning its year-end with a parent or subsidiary, or has special permission from Companies House.
- Shortening flexibility: You can shorten your company’s financial year as many times as needed.
- Overdue accounts: You cannot change the company’s year-end for an accounting period once the accounts for that period are overdue.
4. Notify HMRC
Changing your company’s year-end will normally also affect its Corporation Tax accounting period. If you shorten or lengthen the financial year, you should update the accounting period dates with HMRC. A Corporation Tax accounting period cannot be longer than 12 months, so where company accounts cover more than 12 months, more than one Company Tax Return may be required.
Implications of Changing Your ARD
Adjusting your ARD comes with several implications:
Key Considerations for Adjusting ARD
- Tax Return Deadlines: Changes may alter when your corporation tax returns are due.
- Accounting Costs: Extending or shortening the accounting period may result in additional accounting fees or administrative adjustments.
- Statutory Deadlines: Make sure the new ARD complies with statutory requirements to avoid penalties.
How Accounting People Can Help
Navigating the complexities of ARDs and changing your company’s year-end can be challenging. At Accounting People, we provide guidance to help your business:
Steps to Adjust Your ARD
- Understand Implications: Grasp the legal and financial impacts of changing your ARD.
- File Accurately: Ensure all necessary forms are completed correctly and submitted on time.
- Strategic Planning: Align your ARD with your business goals for maximum efficiency.
Our experienced team can help you understand the reporting requirements, prepare the necessary information and keep Companies House and HMRC deadlines in view.
Conclusion
Your accounting reference date is more than just a date; it’s a cornerstone of your business’s financial health and compliance. Whether you’re looking to align your financial year with strategic goals or simplify reporting processes, changing your ARD can provide valuable benefits. Let The Accounting People Ltd. guide you through every step of the process.
If you are considering changing your company’s year-end, seeking advice from a qualified accountant can help ensure compliance with Companies House and HMRC requirements.
