Although the a company's accounting reference date will initially assumed to be one year on, at the end of the month in which it was set-up, it is possible to change it to one which is more convenient.
Form AA01 (previously Form 225 under the Companies Act 1985), change of accounting reference date is used to facilitate this alteration. Once completed, the document is sent to Companies House for their approval.
Why Change an Accounting Reference Date
There are several reasons why a company might want to change their accounting reference dates. These include:
- To coincide with a parent company’s year end
If the company which was recently incorporated is part of a group, it might wish to have the same year end as the other members of the group and in particular that of its parent company.
This might make the preparation of the group financial statements easier and would avoid having to prepare interim accounts for the company.
In addition, if the new company will become part of the group VAT scheme, having its accounting reference date coterminous with the other members might again make the task of preparing these returns simpler.
- To coincide with the end of the tax year
In situations where a company is owned by a sole shareholder and director, they might find it easier to have the company’s accounting reference date end on the 31 March each year.
This might make completing their tax returns easier as they would just have to use one set of company accounts for the twelve month period. This is opposed to having to split two sets of financial statements and apportion parts of each period in order to calculate their income for the year ending 5 April each year.
- To avoid busy trading periods
For certain companies, whose trade might be seasonal, they might wish to avoid having to prepare accounts or conduct stock takes during their busy periods.
For example, a company manufacturing Christmas decorations might want to avoid a 30 November year end as they would likely be laden with stock and be in the midst of preparing for the December month.
Changing their accounting reference date to say 30 April might be more convenient for them.