When a company is formed, it becomes obligatory for it to abide by numerous compliances. Not complying with any of them could burden you with high penalties or in worse cases even striking off companies' names for the register of companies. One of the most important compliance being filing and submitting the company accounts and tax return before the deadlines. Right from the first year of incorporation the company needs to prepare and file accounts and tax returns. The time period covered under accounts and tax returns varies slightly than the rest of its years of existence.
Company Accounts
Limited company accounts are submitted for each accounting period. The accounting period refers to the number of months falling between two accounting reference dates.
The first annual accounts usually cover a period of more than 12 months since the period covered under the first accounting period begins from the date company was incorporated and ends on the first accounting reference date, i.e. the last day of the month in which the company was incorporated.
Example,
Date of incorporation - 15 August 2018
Accounting reference date - 31 August 2019
Accounting period will be 12 months and 2 weeks (15 August 2018 – 31 August 2019)
Thus, the first year accounts would cover a period of 12 months and 2 weeks. For the following years, the accounts will cover one year only i.e. 1 September to 31 August.
Corporation Tax Return
The corporation tax returns are also required to be filed every tax year. But as per HMRC rules, a tax period cannot exceed more than 12 months, unlike the Companies House accounting period. So there will be a need to submit 2 tax returns for the first year after incorporation. Although, for the following years, only one tax return would be required.
Example,
Situation 1: The company starts trading from the date of incorporation.
Date of incorporation - 15 August 2018
Accounting reference date - 31 August 2019
Tax return for first-year is divided into two parts;
First tax return covering period 15 August 2018 to 14 August 2019.
Second tax return covering period 15 August 2019 to 31 August 2019.
Situation 2: The company starts trading after the date of incorporation.
Situation 2A: The company registers for corporation tax before its accounting reference date
Date of incorporation- 15 August 2018
Started trading: 20 November 2018
Registered for corporation tax: 22 December 2018
Accounting reference date- 31 August 2019
In such cases, the company will be required to file a corporation tax return for the period 20 November 2018 to 31 August 2019.
Situation 2B: The company registers for corporation tax after its accounting reference date
Date of incorporation- 15 August 2018
Started trading: 20 November 2018
Accounting reference date- 31 August 2019
In such a situation, the company will be required to file two tax returns. One for the tax return for the dormant period 15 August 2018 to 20 November 2018. Another tax return for the trading period 21 November 2018 to 31 August 2019.
Conclusion:
First-year after the incorporation is always the most difficult one, you need to be on top of your deadlines, and carry out company filings more vigilantly than usual. Make sure the first tax year and accounting year are understood correctly and filing preparations are done accordingly. After all, no one wishes to be burdened with high penalties or striking off risks in the first year of the new business itself.
Feel free to ask us for any assistance required. Find out more about our company accounts and corporation tax return filing service. We are here to help out new businesses, therefore we do not charge anything extra for your full and abbreviated tax returns for the first year.
