Accounting dates and tax returns
Discussion
With income unlikely to even cover an accountant's fee, I thought I'd do the first year's accounts and returns for a start-up myself.
I thought I'd just about got my head round it (that's a lie) when a new letter from the Revenue completely threw me.
Here we go:
Limited company was created on 15 October 2013.
HMRC writes to me with the following dates:
I've been involved in several discussions on here regarding this oddity of, effectively, a double set of accounts to make the year end a month end... let's say that whilst not realy understanding it, I'd taken an objective position to ignore the understanding and do it anyway.
Then, a couple of weeks ago, I advised HMRC that the company started trading on 1 April 2014. Didn't think it would affect anything, until I received the following response from them:
Why have they changed the dates?
Why is the accounting end date, the day I started trading?
And in all cases, why do you pay your tax before submitting your tax return?
I thought I'd just about got my head round it (that's a lie) when a new letter from the Revenue completely threw me.
Here we go:
Limited company was created on 15 October 2013.
HMRC writes to me with the following dates:
| First accounting period end date | 14 October 2014 | 31 October 2014 |
| Date by which the company needs to: | ||
| pay its corporation tax | 15 July 2015 | 01 August 2015 |
| deliver its company tax return | 31 October 2015 | 31 October 2015 |
I've been involved in several discussions on here regarding this oddity of, effectively, a double set of accounts to make the year end a month end... let's say that whilst not realy understanding it, I'd taken an objective position to ignore the understanding and do it anyway.
Then, a couple of weeks ago, I advised HMRC that the company started trading on 1 April 2014. Didn't think it would affect anything, until I received the following response from them:
| First accounting period end date | 01 April 2014 |
| Date by which the company needs to: | |
| pay its corporation tax | 2 January 2015 |
| deliver its company tax return | 1 April 2015 |
Why have they changed the dates?
Why is the accounting end date, the day I started trading?
And in all cases, why do you pay your tax before submitting your tax return?
Ha ha... you thought it was easy 
I can tell you for no fee at all - if you attempt to complete a limited company set of accounts, related Corporation Tax computations and a correctly completed and compliant Corporation Tax return Form 600 WITHOUT the use of an accountant, you will almost definitely be setting yourself up for problems.
I can tell you for no fee at all - if you attempt to complete a limited company set of accounts, related Corporation Tax computations and a correctly completed and compliant Corporation Tax return Form 600 WITHOUT the use of an accountant, you will almost definitely be setting yourself up for problems.
Sorry - I'd hoped these dates were clear in the OP.
FTAoD:
What is the date of incorporation of the company? 15 October 2013
On what date did it start trading? 1 April 2014
What start date did you notify to HMRC? 1 April 2014 (I informed them during March 2014)
When you say 'trading'... that's the date from which the company had the capacity to take money. It had no mechanism to receive money prior to this. The company had, however, spent money between 15 Oct and 1 April, on various set-up costs and buying stock.
FTAoD:
What is the date of incorporation of the company? 15 October 2013
On what date did it start trading? 1 April 2014
What start date did you notify to HMRC? 1 April 2014 (I informed them during March 2014)
When you say 'trading'... that's the date from which the company had the capacity to take money. It had no mechanism to receive money prior to this. The company had, however, spent money between 15 Oct and 1 April, on various set-up costs and buying stock.
The important date as far as HMRC is concerned is the date YOU notified them as being the date of commencement of trading.
If you do not notify them of a formal date of commencement of trading, HMRC will ASSUME that the date of commencement of trading is the date of incorporation.
So, the first set of dates they gave you were based on their assumption that the company commenced trading on the date of incorporation i.e. 15/10/13.
That triggered the following -
HMRC were expecting you to complete a set of accounts from 15/10/13 to 31 October 2014 i.e. a period of 382 days - just over one year) . This would be split into two separate accounting periods for CT purposes -
15/10/13 to 14/10/14 (an exact 12 month period)
15/10/2014 to 31/10/14 (the balance of 17 days to take you up to the company's formal accounting period end date)
The CT deadlines associated with those dates would have been -
14 July 2015 - payment of Corporation Tax for the 12 months to 14/10/14
31 July 2015 - payment of Corporation Tax for the 17 days to 31/10/14
Now that you have notified them of the ACTUAL trade commencement date, they have amended their filing and tax payments.
However, based on what you are quoting, it looks to me that they seem to have got confused. How can they be telling you to file a tax return for a trading period ENDED on 1 April 2014 when you appear to have notified them that trading COMMENCED on 1 April 2014?
If you were my client, I would have left the situation alone, prepared your first full set of accounts from 15 October 2013 to 31 October 2014 and submitted two Corporation Tax returns covering that first accounting period. That is quite normal and I do that nearly all the time for first sets of accounts.
Once you have this first odd set of accounts out of the way, Corporation Tax matters become less messy.
As for paying before the tax return is submitted, that is part of the current system.
You have 9 months from the end of your accounting year end date to pay your CT bill. You have 12 months from the year end date to file the accounts, computations and tax return. So, the filing date is 3 months after the payment date. Of course, you CAN file the CT return earlier if you want to - so in many cases the tax return will have gone to HMRC well before the 9 month CT payment deadline.
If you do not notify them of a formal date of commencement of trading, HMRC will ASSUME that the date of commencement of trading is the date of incorporation.
So, the first set of dates they gave you were based on their assumption that the company commenced trading on the date of incorporation i.e. 15/10/13.
That triggered the following -
HMRC were expecting you to complete a set of accounts from 15/10/13 to 31 October 2014 i.e. a period of 382 days - just over one year) . This would be split into two separate accounting periods for CT purposes -
15/10/13 to 14/10/14 (an exact 12 month period)
15/10/2014 to 31/10/14 (the balance of 17 days to take you up to the company's formal accounting period end date)
The CT deadlines associated with those dates would have been -
14 July 2015 - payment of Corporation Tax for the 12 months to 14/10/14
31 July 2015 - payment of Corporation Tax for the 17 days to 31/10/14
Now that you have notified them of the ACTUAL trade commencement date, they have amended their filing and tax payments.
However, based on what you are quoting, it looks to me that they seem to have got confused. How can they be telling you to file a tax return for a trading period ENDED on 1 April 2014 when you appear to have notified them that trading COMMENCED on 1 April 2014?
If you were my client, I would have left the situation alone, prepared your first full set of accounts from 15 October 2013 to 31 October 2014 and submitted two Corporation Tax returns covering that first accounting period. That is quite normal and I do that nearly all the time for first sets of accounts.
Once you have this first odd set of accounts out of the way, Corporation Tax matters become less messy.
As for paying before the tax return is submitted, that is part of the current system.
You have 9 months from the end of your accounting year end date to pay your CT bill. You have 12 months from the year end date to file the accounts, computations and tax return. So, the filing date is 3 months after the payment date. Of course, you CAN file the CT return earlier if you want to - so in many cases the tax return will have gone to HMRC well before the 9 month CT payment deadline.
Edited by Eric Mc on Monday 21st April 16:00
Cool, thanks Eric.
I'll go back to them to query the latest letter, and see whether they think it's easier to return to the original dates, or for them to issues a further letter based around 1 April 2014 trading start date.
Unless turnover suddenly goes through the roof, given the likely extremely straight foward nature of the first year's accounts, is there really no elementary way of deriving a compliant set of accounts without an FCA's sign-off?
I'll go back to them to query the latest letter, and see whether they think it's easier to return to the original dates, or for them to issues a further letter based around 1 April 2014 trading start date.
Unless turnover suddenly goes through the roof, given the likely extremely straight foward nature of the first year's accounts, is there really no elementary way of deriving a compliant set of accounts without an FCA's sign-off?
There is no legal or tax requirement that unaudited limited company accounts are "signed off" by an FCA or any other type of qualified accountant.
That is not the issue.
The problem is that a director signing off his own company accounts is publicly declaring that he is fully satisfied that the company accounts are -
fully in compliance with the requirements of accounting standards
fully in compliance with the provisions of the 2006 Companies Act as relates to small companies
is fully compliant with the requirements of the Cororation Tax regulations
In addition to getting the accounts right, the director then has to ensure that they know what they are doing regarding computing the Corporation Tax situation of the company, preparing correct and compliant Corporation Tax computations and then slotting all that data correctly into the Corporation Tax return.
Ancilliary to all of the above is the assumption that the director is properly handling PAYE matters - which doesn't just cover salaries.
That is not the issue.
The problem is that a director signing off his own company accounts is publicly declaring that he is fully satisfied that the company accounts are -
fully in compliance with the requirements of accounting standards
fully in compliance with the provisions of the 2006 Companies Act as relates to small companies
is fully compliant with the requirements of the Cororation Tax regulations
In addition to getting the accounts right, the director then has to ensure that they know what they are doing regarding computing the Corporation Tax situation of the company, preparing correct and compliant Corporation Tax computations and then slotting all that data correctly into the Corporation Tax return.
Ancilliary to all of the above is the assumption that the director is properly handling PAYE matters - which doesn't just cover salaries.
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