In our recent blog, The Companies Act 2014 – Signed Into Law, we reviewed the new company structures which were introduced when the 2014 Act which commenced on 1st June, 2015. A recent publication by the Companies Registration Office (CRO) has outlined a number of new and amended forms, which are now in place following the commencement of the Act. The publication also outlines guidance on matters relating to Financial Statements and the claiming of audit exemption.
While many of the changes to the CRO forms will more than likely be managed by your financial or company secretarial advisor, we have reviewed the restrictions to be introduced in relation to the changing of a company’s financial year end.
From a review of the publication issued by the CRO we have noted the following matters, which business owners and directors should be aware of when preparing their Financial Statements.
Changing Your Financial Year End
The CRO have introduced a Form B83 – Alteration of Financial Year End Date, which relates to a company’s ability to change its year end. Since the commencement of The Companies Act 2014, a company is now only in a position to:
- Change its financial year end once every five years.
- Not have a financial year end exceeding a period of eighteen months.
While many companies may not wish to change their year end on a regular basis, the introduction of the above Form B83, will impact other companies who wish to alter their year end for strategic or financial reasons.
First Set Of Financial Statements
In line with current legislation, a company’s first set of financial statements will be required to cover a period from the date of incorporation to the financial year end. However, in line with the above restrictions, a company’s first set of financial statements cannot now exceed a period of eighteen months.
For example, if your company is incorporated on 1st July, 2015 your first set of financial statements will run from 1st July, 2015 up to a maximum year end date of 31st December, 2016.
In addition to the above, directors will need to be mindful of the “nine month rule” which will continue under the new Act. Under this rule, an Annual Return cannot be more than nine months after the financial year end. Again taking an example, if your financial year end is 31st December, 2016 your Annual return can be no later than 30th September, 2017, i.e. nine months after the year end.
Subsequent Financial Year Ends
Since the commencement of The Companies Act 2014, on the 1st June, 2015, Financial Statements are now restricted to a period of twelve months, give or take seven days either side. If you wish to amend your financial statements by more than the permitted seven days, you will be required to complete and submit the above Form B83, which again can only be submitted once every five years.
There are certain exemptions to the new five year rule as set out in Section 288 (10) of the Act:-
- The company is a subsidiary undertaking or holding undertaking of another EEA undertaking and the new financial year end now coincides with that of the EEA undertaking.
- The company is being wound up.
- On direction from the Director of Corporate Enforcement.
The introduction of the above rules surrounding financial year ends will place significant restrictions on companies and due consideration should be taken before a company makes the decision to change its year end.
If you would like to discuss the above in more detail or would like advice on changing your financial year end you can contact us here.
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