By Jason Sullock, New Customer Marketing Manager, Sage
The key to streamlining the end of year process for your business is to plan it strategically. The end of year is not unforeseen after all, and so time permitting, it is a question of organising the year end routines to happen at the right time, and review both the on-going business and its drafts accounts well ahead of the period end.
All companies must file accounts annually with Companies House and HM Revenue and Customs (HMRC). A company will select a financial period end which is agreeable to a combination of its shareholders or other group members. For new companies, the main issues you need to consider are:
• Companies House requirements
When you register a new company, its financial year end or accounting reference date is usually determined according to the month of incorporation - if you registered on 6 June, the accounting period will begin on the date of incorporation, 6 June, and its year end will be deemed to be 30 June, in the following year).
The company’s next financial year begins at the end of the
previous one. If you prefer, you can specify a different period-end for the first year. But you are not allowed to file a set of accounts for a period greater than 18 months and a company cannot extend its year-end more than once every five years.
• HM Revenue and Customs (HMRC) requirements
You must notify HMRC within three months of the company's incorporation, or face a penalty of £100, and then file a corporation tax return annually. If the first period of trade exceeds 12 months, then two returns will be filed for this period, the latter one being for the 12 months ending on the accounting period end.
• Accounting and tax planning
If you operate a group of companies, or more than one business, having the same year end for all of them makes financial and management accounting more straightforward - particularly if you are going to want to claim group loss reliefs for any of them.
• Year ends and VAT
It is most practical to set your VAT (Value Added Tax) quarters so that one will coincide with your year end. This makes reconciling the VAT at your accounting year end more straightforward.
• Payrolls and year end
The end of the payroll year is 5 April. By having an accounting year end that matches your payroll year end, you need only reconcile your payroll figures annually. However, even when a weekly payroll is run, a year end that is also a month end is more sensible as other businesses and banks provide monthly statements.
Legal requirements - the basics
• Companies House requires private company accounts to be filed within 10 months of the year-end, but this will be extended if you decide to extend the first accounting reference date.
• HMRC requires company accounts to be filed within 12 months of the year end. This deadline will also be extended when the accounting reference date is extended.
• All companies other than large companies pay tax nine months and one day after their year end.
• Large companies pay tax throughout the year by instalments.
For more information on managing your financial year end, download this helpful whitepaper here
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