What is your financial year-end?
The financial year-end of a Limited Company in Ireland is decided by the directors of the company when filing your second Annual Return (18 months after incorporation).
The company’s financial year-end usually begins as soon as your company is incorporated and ends 18 months after that date. However, many of our clients choose the 31st of December as their year-end because it coincides with the calendar year.
If you are trying to work out your financial year-end date, talk to a professional firm, like Kinore, for advice on year-end accounts and general accounting and bookkeeping advice for startups.
In this guide, we discuss what you should check when you are approaching your financial year-end and preparing to file your Annual Return with the CRO.
It’s important to note that each company will have a different financial year-end, and if you’re unsure when you should be filing accounts, talk to our Client Services Team – we’re here to help!
If you have an accountant, it is around your financial year-end that they will look for your reconciled bank accounts, invoices and expenses so they can complete professional financial statements for your company. This is also called your “bookkeeping records”. You can do this bookkeeping yourself or outsource to a professional firm like us.
Here are 10 things you should check before your financial year-end:
1. Salary
It’s an excellent time to check your salary when your financial year-end is approaching. If your situation changes, for example, you’ve gotten married, this will affect your tax credits. Ensure you’re using all the credits and reliefs available to you to save on your tax liability.
Directors of Limited Companies are also entitled to avail of tax-free vouchers of up to €1,000 twice a year. This may be a nice bonus for you and your colleagues while saving on your tax bill. If you’re unsure about your tax situation, speaking to an accountant will help with any confusion.
2. Pension
It is also a great time to check if your company should contribute to a pension on your behalf.
If your accounting period ends on 31 December, any pension contribution you intend to pay must be paid before 31 December to get a deduction in your accounts. You can also make an employer contribution if you employ your spouse in your business. There are also great tax benefits to contributing to a pension that can help reduce tax liability.
3. Expenses
Businesses can use the cost of their expenses to bring down their tax liability.
The expenses incurred must be wholly and exclusively for the business for them to be deemed as allowable, tax-deductible business expenses.
It’s essential to ensure you have good records of all your receipts and bank statements to prove your purchases. Stationery, petrol, and accounting fees are some examples of allowable expenses. Talk to us if you are unsure about what you can claim.
4. VAT
If you’re VAT registered, you’ll need to check that VAT is being claimed correctly and that you have been charging the correct amount of VAT.
If you’re not VAT registered, this is an excellent time to check your turnover for the last 12 months and update your accountant on your trading activity.
There are specific criteria that, when you meet, you will need to register your company for VAT. For instance, one of the criteria is if you have reached the turnover threshold for VAT in Ireland.
If your turnover reaches this threshold, you must register for VAT. Your financial year-end is a good time to consider if you need to register for VAT. Check out our guide on registering for VAT in Ireland for more information.
5. Stock and work in progress
You should take inventory of any physical stock, goods or loose parts you carry.
These are important to note for your company’s balance sheet. Don’t worry if you’re unsure what to include here; our Chartered Accountants will help you determine what information they need to prepare the accounts for your company.
6. Employees
Occasionally, your employees may incur business expenses such as business travel. Any costs your employee incurs will need to be reimbursed, and then you can also claim their expense as an allowable business expense to Revenue.
You must keep the receipts for the transactions that occurred. You should also have a straightforward process to say that this was an employee expense and the date it was reimbursed to the employee. Consider automating your bookkeeping Xero for easy document management.
This may also be an excellent time to check if you need to hire employees or check the efficiency of their work.
7. Books and records
Check that you have all the correct and up to date books and records for your company before its financial year-end. If you have an accountant, they will be looking for these as early as possible to prepare your accounts.
Invoices
An invoice tells your clients how much they need to pay you and the payment terms. It's important to keep records of all invoices sent because they will be recorded in your accounts as debits and credits.
Receipts
Make sure that you have all your business expense receipts so you can claim them to reduce your tax bill. If you have an accountant, they will look for proof of business purchases before they calculate the total amount of expenses.
Bank statements
In general, all Limited Companies should have a separate bank account as you are setting up a new legal entity. Your bank will need to be reconcilied against your business transactions to ensure that the correct payments have been made.
8. Outstanding debtors and creditors
Reviewing your invoices and bank statements will help you note any outstanding debtors, creditors, cash on hand, and bad debts at the year-end.
If you need help preparing accounts for your company, we have a team of Chartered Accountants to help you stay compliant with Revenue and the Companies Registration Office. Find out how much it costs to have an accountant in Ireland.
9. Accounting software
As a new company, you may not think you need to use accounting software straight away, but there are huge benefits for you and your accountant if you do use it. All your books and records can be maintained using online accounting software, and you can give your accountants access to your software so they can prepare your company’s accounts.
Accounting software will save you time and money in the long run. It’ll give you more time to focus on the parts of the business you’re good at.
We are a firm of Xero-certified accountants and recommend Xero to all our clients. To learn more about how Xero can help you save time and costs, and help you to manage your business more efficiently, talk to our team today. We’re here to help.
10. Your accountant
Finally, check in with your accountant. Your accountant will prepare your year-end accounts, so use this time to ask them any questions about your business’s finances and discuss the year ahead and your plans for the future.
Working with an online accountant will ensure that your accountant is always accessible to you, proactive in their service delivery, and has the expertise to help your business run more smoothly and efficiently in the year ahead.
If you are still wondering if you need an accountant for your small business, we are always happy to talk you through any needed services. If you have deadlines, it’s crucial to contact a professional as soon as possible to avoid any fines or penalties.
Can you change a financial year-end?
Company directors may wish to move their financial year-end to match a parent company or other deadlines that require financial statements, such as the Annual Return (check out our post on the annual return filing date). You can change the year-end by at least seven days and up to 12 months ahead.
To change your financial year-end, you need to complete a form B83. Your accountant usually prepares this form alongside your Company Secretary.
Many companies choose to have a December year-end as it may be more convenient to follow the calendar year. Speak to your accountant or contact our Client Services Team if you want to change your financial year-end.
Tom is a Fellow Chartered Certified Accountant (FCCA) and Chartered Tax Advisor (CTA) and is the Head of Accounting at Kinore. Areas of expertise include Accounting, Compliance, Taxation relating to small business and company directors.
