Why your charity should consider changing its financial year

February 18, 2021

If your charity, like most, follows the government financial year, from April to March, your accounts for 2019/20 will have been due at the end of last month.

But you now have another task on your hands – wrapping everything up in time for year-end, on 31 March 2021.

For some charities whose activities are still on pause due to the COVID-19 lockdown, now could be the ideal time to manage the process of gathering all the necessary documents together and preparing them for your accountant to process.

For others, it could be logistically very difficult, with various restrictions still in place and an uncertain outlook for the next few months.

If your charity is likely to be busy between now and the end of March and you’re dreading handling your year-end accounting tasks at the same time, a longer accounting period might give you the additional breathing space you need.

Then, in the longer term, it could also allow you to push back your next filing deadline if you think you might have difficulty meeting it.

It could also be necessary if your charity requires an audit, to ensure this is carried out to the right standard.

In a guidance document published last year, the Financial Reporting Council said some companies may need to reconsider their financial reporting deadlines. The same goes for any charity that needs an audit or independent examination.

“It is vital auditors have sufficient time and support to carry out their work to a high standard, including reassessing work done to reflect changed circumstances,” the document said.

It added that this reassessment “will take place right up to the point of signing the auditor’s report, and may need the provision of further evidence and information by management”.

There are practical considerations, too, such as accessing any documents you keep on physical premises, and giving multiple staff or auditors access to the building which might not be possible under current lockdown conditions.

In some cases, it might help to shorten your financial period if you’re concerned about getting access to the records you need to cover up to your usual year-end.

How to change your financial year

Before you get started, make sure you’re up to date on all your previous filing obligations, as you can’t change your financial year if your latest set of financial accounts are overdue.

Newly-registered charities that haven’t submitted an annual return yet will need to request special permission using an online enquiry form.

Bearing that in mind, you can change the date through the Government’s website – or talk to us and we can handle it for you.

There are different rules around how long the period has to be, and how often you can change it, depending on the structure of your organisation.

If you run a charitable incorporated organisation (CIO) or your charity is unincorporated, you can change your financial period to a minimum of six months, and a maximum of 18. You can only do this once every three years.

If you run a charitable company, however, you can shorten it as often as you like, down to a minimum of one day. You can also lengthen it to a maximum of 18 months, but you can only do this once every five financial periods.

Changing your financial year-end will usually affect your accounting period for corporation tax, too. If you’ve lengthened your financial year you will have to file two sets of accounts as your accounting period can’t be longer than 12 months. If you’ve shortened, however, your accounting period will be shorter too.

Make sure you refer to your charity’s governing document when making the decision to adjust key dates or postpone any meetings, such as AGMs, and keep a record of the reasons for any changes you make.

Filing extensions

If you’re likely to struggle getting your return prepared on time but you don’t want to take the step of changing your financial period, you may be eligible for an extension instead.

The Charity Commission has assured charities it will be “as flexible and supportive as possible” in its response to those affected by the pandemic.

It said charities struggling to meet their filing deadline for annual returns can request an extension – an offer that around 2,300 charities had reportedly taken up as of September 2020, with around 91% of those requests approved.

You can apply by emailing filingextension@charitycommission.gov.uk and including your charity name and registration number.

Companies House, meanwhile, has automatically extended filing deadlines for companies with a deadline that would usually fall any time between 27 June 2020 and 5 April 2021. If your charitable company has a filing deadline that falls on 6 April 2021 or later, you’ll need to apply for an extension.

Get in touch for more advice on accounting for your charity.

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Dick Haffenden JCS

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020 8643 1166

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