When should I choose my financial year end

Page: When Should I Choose My Financial Year End

Choosing Your Financial Year End at Incorporation

You set the financial year end when you incorporate. The accounting reference date (ARD) you select on Form NNC1 becomes the company's financial year end, determining the due dates for your first annual return and profits tax return. This choice shapes your compliance schedule for the company's entire life.

The ARD marks the last day of the accounting period. For a new company, the first period runs from the incorporation date to the chosen ARD. That first period can be longer or shorter than 12 months.

How the Financial Year End Affects Your Annual Return

Your financial year end dictates the "return date" for Form NAR1. The annual return is due within 42 days after each anniversary of incorporation or re-domiciliation. The Companies Registry calculates this deadline using the anniversary, not the ARD. In practice, the dates are linked because the NAR1 must contain the financial statements for the period ending on the ARD.

A company with a 31 December ARD prepares financial statements for each calendar year. The NAR1 due date remains the incorporation anniversary, but directors must ensure the audited accounts for the 31 December year end are ready in time to file the NAR1.

Choosing Accounting Reference Date Hong Kong

Directors should align the ARD with the natural business cycle. Common choices are 31 December for a calendar year end, 31 March to match the Hong Kong tax year, or the last day of any month that suits the business.

The first accounting period can be up to 18 months from incorporation. A company incorporated on 1 June 2026 choosing an ARD of 31 December 2026 has a first period of seven months. A company incorporated on 1 June 2026 choosing an ARD of 30 November 2027 has a first period of 18 months. The maximum permitted first period is 18 months from incorporation.

Financial Year End Selection Hong Kong

Financial year end selection in Hong Kong must also consider the Inland Revenue Department's block extension scheme. The IRD issues profits tax returns (Form BIR51) based on the accounting date. Companies with a 31 December year end receive their tax return later than those with a 31 March year end, as the block extension scheme assigns different due dates based on the ARD.

Consult your auditor before fixing the ARD. Audit firms' workloads fluctuate throughout the year, and a popular ARD can mean higher audit fees or longer turnaround times.

Hong Kong Company Accounting Period

The Hong Kong company accounting period is defined by the accounting reference date. Once set, you can change it by filing Form NAC4 with the Companies Registry. A company may shorten or lengthen its accounting period, but no period may exceed 18 months without the Registrar's consent.

Changing the ARD affects both the annual return and the profits tax return timelines. The IRD must be notified separately through the tax return process, and the block extension may no longer apply if the new ARD falls outside the existing schedule.

Practical Considerations

If you control multiple companies, spread their year ends across different months. Having all companies share the same ARD concentrates audit and filing work into one busy period. Staggered year ends keep the compliance workload manageable.

The first ARD is effectively fixed for the company's life. You can change it later with Form NAC4, but each change incurs filing fees and requires board and member approval. Choose thoughtfully at incorporation.