Typically, the ARD of a company falls on the final calendar day of the month in which the anniversary of its initial registration at Companies House falls.
Understanding a company’s financial year
The initial financial year of a company starts on the date Companies House originally incorporated it and ends on its ARD.
Yearly accounts need to be completed for both HMRC and Companies House, reporting all financial transactions that occurred throughout the year.
For the majority of limited firms, the financial year consists of 12 months, excepting the first year the business was originally formed. Thus, the first economic year for some companies can stretch for more than 12 months.
A business that registered itself on 12th May 2020 will have an ARD of 31st May 2021. Thus, the initial financial year of this firm will be 1 year and 19 days.
The second financial year of the business will start on 1st June 2021 and end on 31st May 2022, i.e., 1 year.
Future financial years are likely to stay identical, unless the company wants to lengthen or reduce them by modifying their ARD.
Getting an ARD for your company
The ARD for your company will be decided by Companies House and they’ll alert you right after registration. If you register the business online using the Web Registration facility of Companies House, you are likely to receive this notification by email. Also, you can use Companies House Services to locate it.
ARD is the date when the financial year of your company will end.
When your financial year ends, you must:
- Forward a copy of your accounts to each shareholder within your company.
- Forward a copy off your accounts to the registrar and HMRC.
- Submit full statutory accounts.
Annual accounts are important for reporting the financial transactions made throughout the year, which also includes the ARD. You must provide a reference in the accounts to denote the amount of profit/loss made by your company along with the final amount of tax you’re required to pay.
Changing the ARD of your company
If required, you can modify the accounting reference date of your company once the company is established in order to shorten or extend the financial year. However, this can only be done before the annual accounts are delivered for your present financial year or immediately after the previous financial year. Also, note that the ARD cannot be changed if the accounts become overdue.
The last date for sending your annual accounts is nine months after the financial year of your company has ended. Hence, you need to make the changes to the financial year prior to the deadline. Once the financial year changes, the last date to file your documents will change as a result.
How to extend your company’s financial year?
The financial year of a limited company or an LLP can be extended by up to 1 year 6 months (or more if your business is in administration), however, this can only be done once within a period of 5 years. Firms are able to extend their financial year multiple times every 5 years only in the below-mentioned scenarios:
- If your company holds an administrational status
- If a company is able to align its dates with a parent or subsidiary firm
- If special permission for the same has been granted by the Companies House
Also, the company directors must pass a resolution to extend a company’s financial year.
How to shorten your company’s financial year?
A company may also shorten its financial year as per their convenience. The financial year can be shortened by as little as 24 hrs. with the only exception being with the initial set of accounts that must be for a period of at least six months.
When the ARD of a company is changed, its financial year ends on the same date each year, except where the company members decide to make any additional changes. The annual accounts of a company will, as a result, report all transactions starting from the date when the company was formed up until the updated ARD. As when extending the financial year, the company needs to pass a resolution to this end.
Using Companies House to change your ARD
In order to change the end date of your financial year and communicate it to Companies House, it’s necessary to provide the information below using the online portal or through the post:
- Full name of your company
- Company identification number
- Attested signature of a company director, secretary, or another individual in power
- Accounting reference date (current or the last accounting period when the annual accounts weren’t overdue)
- New ARD
The above information can be sent using Form AA01 from Companies House. Simply download it and send it online or through the post to Companies House.
The majority of online changes will be updated on the public record within 2-3 hours. On the contrary, postal modifications may take longer before they’re processed.
Is there a difference between a company’s corporation tax accounting period and its financial year?
A company’s corporation tax accounting period can be decided by HMRC to prepare and pay corporation tax. As opposed to the financial year, the corporation tax period won’t begin until a company becomes ‘active’. This could be the date where a company is incorporated where it begins trading right away. Here, the accounting period along with the financial year will begin on the same date. If a company stays inactive for some time before commencing trading, its accounting period may begin after a while. A company needs to inform HMRC within 90 days of starting its operations by registering it on the internet for corporation tax.