Substituted Accounting Period (SAP) Explained UK

Substituted Accounting Period (SAP): What It Means in the UK

A Substituted Accounting Period (SAP) refers to a change in a company’s financial year or accounting period from the default or originally established date. While this term is more commonly used in tax systems such as Australia, the concept of choosing a different year-end is also relevant in the UK under UK company and corporation tax rules.

What Is a Substituted Accounting Period?

A substituted accounting period is an alternative financial year used in place of the default one assigned at incorporation or previously used by a business. Instead of using a 12-month period ending on the company’s incorporation date or another standard tax year-end, a business may choose a different period that better aligns with its operational or group structure.

In the UK, this change is sometimes referred to simply as a change of accounting reference date rather than SAP, but the principle is similar.

Is SAP Available in the UK?

Yes. While the UK doesn’t formally refer to it as a “substituted accounting period” in legislation, the concept exists. Companies can change their accounting reference date (ARD) with Companies House, and HMRC allows for matching accounting periods for corporation tax purposes.

This flexibility allows companies to adopt year-ends that suit business cycles, group alignment, or tax planning strategies.

What Are the UK Rules for SAP?

In the UK, a company can change its accounting period by:

• Filing a change of accounting reference date with Companies House (this alters the period for statutory accounts)

• Informing HMRC when submitting Corporation Tax returns (which may involve creating shorter or longer accounting periods, subject to limits)

Key UK rules include:

• You cannot make a new accounting period longer than 18 months

• You can’t change the ARD if accounts are already overdue

• HMRC requires a separate Corporation Tax return for each accounting period created by the change

• You must notify HMRC of the change by the filing deadline for the affected accounting period

If you're part of a group, you may also need to apply for HMRC approval when aligning year-ends for group relief purposes.

Why Would You Use an SAP?

There are several practical reasons for adopting a substituted accounting period (or changing your year-end):

• Group alignment: To align a subsidiary’s year-end with its parent company

• Operational seasonality: Some businesses prefer a year-end after their busiest season, so the accounts reflect full-year performance

• Simplified reporting: Synchronising year-ends across group companies can reduce complexity and ease consolidation

• Business transitions: During restructuring, acquisitions, or mergers, companies often adjust accounting dates

• Tax planning: Timing a year-end can impact the tax treatment of profits or losses across different periods

Benefits of an SAP

Choosing the right accounting period can deliver several benefits:

• Improved internal reporting: Better reflects the business cycle and seasonal trends

• Streamlined group accounts: Easier to consolidate and audit when group entities share the same year-end

• More accurate tax forecasting: When profits are rising or falling sharply, choosing a year-end can help smooth Corporation Tax payments

• Administrative efficiency: Aligning tax deadlines and financial reporting reduces duplication and confusion

However, care must be taken when planning changes, as it can affect filing deadlines, payment timings, and HMRC obligations.

Conclusion

A substituted accounting period—while not formally called that in the UK—is fully supported by UK company law and tax rules. Changing your accounting year-end can be a strategic move, particularly when aligning with parent companies, easing reporting, or optimising tax efficiency. That said, it must be done correctly, with notifications to both Companies House and HMRC, and careful consideration of the operational and financial impact.