Is this the end of the one-day shuffle?
A company can change its accounting reference date (‘period end’) by giving notice to shorten its accounting reference period. In doing so, subject to certain exceptions, Companies House grants up to an additional three months to file the company’s accounts, based on the date of the notice. This extension was designed to prevent a situation where shortening a period resulted in late delivery and the directors being in immediate default.
The Department for Business, Energy & Industrial Strategy issued a consultation earlier this year with a view to enhancing the role of Companies House and increasing the transparency of UK companies. As part of this consultation, they have noted that some companies take advantage of this extended filing deadline by shortening their period end multiple times, reducing their accounting period by one day, in order to gain additional time to file their accounts (the “one-day shuffle”).
The consultation document states that “this is contrary to the intended spirit of the provision and is a cause for complaint by users of the register. Misuse of this mechanism results in no financial information being available for companies over an extended period. This may be an indication that a company is experiencing financial difficulties or has some other reason to conceal the extent of its assets and liabilities.”
The proposal is to implement a limit to the number of times a company can shorten its accounting reference date, such that the regulations retain the flexibility in allowing companies to shorten their accounting period, but prevent companies from abusing this when the reason is solely the desire for an extension to their filing date.
The consultation closed on 5th August 2019 and the feedback is currently being analysed.
For those companies that currently adopt this ‘practice’, going forward it is possible (likely) that this loophole will be closed or significantly curtailed. Therefore, companies will need to plan to have their accounts available for filing by their regular filing date.
For more information on this topic please contact our Corporate Services Director Paul Spencer