Company law allows accounts to run for up to 18 months. Corporation tax law never allows a single accounting period longer than 12. Here is exactly how the two rules interact.
Zazentax Corporation Tax Series · Updated July 2026 · Reading time: about 6 minutes
This situation comes up more often than a quick read of the legislation suggests: a new subsidiary aligning its year end with the group, a company preparing completion accounts around an acquisition, or simply a director choosing to extend the first set of accounts. Whenever a company’s period of account exceeds 12 months, its corporation tax position needs to be built from two separate accounting periods, computed and filed independently. Missing this step, or treating the whole period as one return, produces the wrong tax rate, the wrong filing deadline, and in most cases the wrong figure entirely.
Period of Account and Accounting Period Are Not the Same Thing
The period of account, usually abbreviated to POA, is the period for which a company’s statutory accounts are prepared. Company law permits this to run for up to 18 months. The accounting period, usually abbreviated to AP, is the period corporation tax is actually assessed on, and it can never exceed 12 months under section 10(1)(a) of the Corporation Tax Act 2009. Where a period of account is 12 months or less, the two coincide and nothing further is needed. Where it runs longer, the accounting period rules force a split.
Key point: A period of account exceeding 12 months is never taxed as a single return, however clean the underlying accounts are. It is always restated as two accounting periods, each with its own computation.
How the Split Is Drawn
The first accounting period always runs for the first 12 months of the period of account, simply because an accounting period cannot exceed that length. The second accounting period then covers whatever remains, starting the day after the first one ends and running to the end of the period of account, however short that leaves it. There is no flexibility in where the line falls; it is fixed entirely by the 12 month cap, not by the company’s own preference or by natural break points in its trading activity.
Splitting the Trading Profit
Trading profit is adjusted for tax purposes across the whole period of account first, using the normal add back and deduction rules, and only afterwards is that single adjusted figure divided between the two accounting periods on a time basis. Working the adjustment separately for each period, rather than adjusting once and then splitting, is a common source of small errors and is not how the mechanism is meant to work.
A Worked Example
Hartwell Logistics Ltd prepares its first set of accounts for the seventeen months from 1 April 2025 to 31 August 2026. Its adjusted trading profit before capital allowances for the whole period is £510,000.
The first accounting period runs from 1 April 2025 to 31 March 2026, the maximum 12 months permitted. The second accounting period then covers the remaining five months, from 1 April 2026 to 31 August 2026. Splitting the adjusted trading profit on a time basis gives £510,000 multiplied by 12 divided by 17, which is £360,000 for the first accounting period, and £510,000 multiplied by 5 divided by 17, which is £150,000 for the second.
Action required: Two separate corporation tax computations follow from here, with capital allowances, non-trading income, chargeable gains, and charitable donations all needing their own treatment across the split, covered in the next two parts of this series. Each accounting period also carries its own filing deadline and payment date, so the two liabilities are never simply added together and settled as one figure.
Key Takeaways
- A period of account and a corporation tax accounting period are legally distinct concepts; the first can run to 18 months, the second is capped at 12.
- Where the period of account exceeds 12 months, it is always restated as two accounting periods: the first 12 months, then the remainder.
- Adjusted trading profit is calculated once across the whole period of account, then time apportioned between the two accounting periods.
- Each accounting period produces its own corporation tax return, its own filing deadline, and its own payment date.
- The split point is fixed by the 12 month rule; it cannot be moved to suit a natural break in the company’s trading pattern.
Preparing Accounts for a Period Longer Than 12 Months?
Zazentax identifies both accounting periods correctly, splits every income stream on the right basis, and prepares both corporation tax computations so nothing is missed across the boundary.
