Running a business comes with a lot of responsibilities, and keeping your financial records accurate and up-to-date is one of the most important. It’s not just about staying on top of things for yourself—it’s also a key part of meeting legal requirements and making smart decisions for the future of your business. A major part of this involves knowing your company’s accounting reference date (ARD)—the date that marks the end of your company’s financial year. Understanding how the ARD works and what happens when you adjust your company’s year-end can make a big difference in managing your finances smoothly.
This guide explains what ARDs are, their significance, and how you can change your company’s year-end if needed.
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.
Your ARD plays a vital role in tax planning, reporting, and compliance with Companies House and HMRC. It defines the deadlines for submitting your annual accounts and tax returns, ensuring your company remains compliant with UK regulations.
Why Is the ARD Important?
The ARD impacts several areas of your business, including:
Key Areas Influenced by ARD
- Compliance Deadlines: Annual accounts and confirmation statements must be submitted to Companies House based on the ARD.
- Tax Planning: The ARD influences your corporation tax deadlines and financial forecasting.
- Strategic Planning: Aligning your ARD with your business cycle can streamline operations and reporting.
Failing to comply with deadlines associated with your ARD can lead to penalties and damage to your company’s reputation.
Can You Change Accounting Reference Date?
Yes, change of accounting reference date can happen if necessary. Companies often do this to:
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 will impact your tax planning, reporting processes, and operational cycles.
2. File the Change with Companies House
To change your ARD, you must file Form AA01 (for private limited companies) with Companies House. This can be done online or by post.
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 cannot extend your accounting period more than once in five years unless the company is in administration or aligns with a parent company’s ARD.
- Shortening flexibility: Shortening the accounting period can be done as often as needed.
4. Notify HMRC
Changing your ARD may also affect your corporation tax period. Notify HMRC to avoid discrepancies and ensure your tax returns match your new financial year-end.
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 The Accounting People Ltd. Can Help
Navigating the complexities of ARDs and changing your company’s year-end can be challenging. At The Accounting People Ltd., we offer expert 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 ensures compliance with Companies House and HMRC, helping you avoid penalties and streamline your reporting process.
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.
Get in touch with us today to ensure your business’s financial year-end works for you, not against you.