4 accounting questions you might be asking this leap year
2020 is a leap year, which means that 29th February is making a rare appearance in our calendars. ‘Leap year day’ is associated with some bizarre facts, but what effect does this extra day have on your accounts?
Here are a few simple answers to questions you may well be asking as you prepare your books this February.
1. If my company’s year end is February, what date should I prepare its accounts to?
Thankfully, HMRC counts a year as 12 months rather than 365 days, so you don’t have to do anything special to account for the extra day in a leap year. If your company’s year end is the last day of February you should simply prepare accounts to the end of the month, whatever date that is.
|Year||Date to prepare accounts to if your company’s year end is in February|
2. Should I avoid invoicing on leap year day?
You might be reluctant to raise an invoice or enter costs on 29th February in case something goes wrong when it comes to filing your tax return but don’t worry. Because HMRC counts a year as 12 months rather than 365 days there’s no reason why you shouldn’t send an invoice or perform any other accounting action on 29th February.
3. Is it better to be employed or self-employed on 29th February?
While you might think that a leap year day could potentially raise more complications if you’re self-employed, you could actually be better off! Employees who are on an annual salary don’t get paid for this extra day but if you’re self-employed you can charge your rates as normal.
4. Can my accounting system handle the leap year?
If you’re using a basic bookkeeping system or a simple spreadsheet to manage your accounts, make sure that it recognises 29th February. If it doesn’t, you could well run into trouble. What if you need to run payroll for an employee who was born on 29th February, for example? To be certain of a stress-free leap year day, use reliable, robust accounting software that you can trust to recognise the extra day.
FreeAgent uses the data you enter to ensure your accounts are compliant, no matter how many days there are in the year. Find out more about FreeAgent’s tax and accounting software and see how easy managing your business finances can be.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.