Accounting periods for Limited Companies affect when accounts and corporation tax returns need to be filed.
What is an Accounting Period?
Limited Companies need to report their business numbers for various reasons, including for their corporation tax return and Companies House annual accounts.
For this they need to set a start date and finish date so they know which numbers to include for their reporting – this is an accounting period.
How Long is an Accounting Period?
An accounting period for a Limited Company is normally 12 months long. But there are circumstances when they can be longer or shorter.
For example, a Limited Company has a reporting period of 1 January. Its annual accounting period is 1 January to 31 December each year, and its quarterly accounting periods are 31 March, 30 June, 30 September and 31 December.
Accounting periods can be longer or shorter than 12 months:
- On Company formation;
- If the accounting period is changed;
- In the final set of accounts if the Limited Company is being shut down.
When a Limited Company is formed Companies House automatically sets the first period to automatically be 12 months from the end of the month the company was registered. But this means it will be slightly longer than 12 months.
A Limited Company is formed and registered on the 3 June 2019. The first accounting period will be 3 June 2019 to 30 June 2020 and then be the 30 June thereafter.
You can choose to change your Limited Company period at any time online but there are rules you need to follow if you wish to do this.
Accounting Period for Corporation Tax
An accounting period for corporation tax is usually the same as the accounting period.
However, a corporation tax period can never be more than 12 months long. So that means for accounting periods longer than 12 months, two corporation tax returns will need to be filed.
What is the Name of an Accounting Period that is One Year Long?
An accounting period that is one year long exactly is commonly referred to as an “accounting year”.
What Happens at the End of An Accounting Period?
At the end of the period, the books of the Business are closed. That way business owners and managers can review performance over the period and produce financial statements.
Financial statements usually include a profit and loss account which shows how the company has performed during the period and a balance sheet which is a snapshot of the businesses assets and liabilities at the period end date.
Can An Accounting Period Be Less than 6 Months?
Yes. If a Limited Company is newly formed then the accounting period can be less than 6 months.
Why would a company shorten its accounting period?
A company may need to make a change for all sort of reasons including:
- Deferring tax liabilities;
- Avoid Companies House filing penalties;
- Wanting to make a change to its internal reporting.
New Here? Learn how to set up the financial side of your business with these guides and resources:
- Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
- Tax Records and Bookkeeping – Understand what tax records you’ll need to keep and how to set up your own bookkeeping system;
- Self Employment Taxes Explained – Learn what taxes you’ll pay, how much and when;
- Invoice Template – Free template and step-by-step guide so you can get paid by your clients.