9.4 We can illustrate the choices by the example of Hunston Developments Limited: the Company has an accounting reference date of 30 June, and the Buyer, Gipping Enterprises Limited, has an accounting reference date of 31 December. There are the following choices if Completion takes place at 30 September 2009: Gipping Enterprises Limited may decide that the accounts for the 12 months to 30 June 2009 will be filed and that the accounting reference date will then be changed to 31 December 2009. This is therefore a change in the current period. There will be a period of 12 months, followed by a period of 6 months. Alternatively it may decide to extend the accounting reference period so that the accounts to 30 June 2009 are not filed; accounts are prepared for the 18 months from 1 July 2008 to 31 December 2009 and these are filed. This is therefore a change to the prior period. 9.5 If the accounting period is extended to one of 18 months, then the tax computations will be prepared on the basis that most of the figures in the profit and loss account will be deemed to accrue on an even basis Section 52 CTA (formerly Section 72(2), ICTA). (There are some items which are accounted for on an actual basis, such as capital gains and capital allowances.) If the accounting period is longer than 12 months, it is divided into an initial period of 12 months, followed by the balance of the period, under the provisions of Section 10(1)(a) CTA (formerly Section 12(3)(a), ICTA). 9.6 It is very likely that the corporation tax computations for Hunston Developments Limited prepared for the year to 30 June 2009 will look materially different from the computations which are essentially 12/18 of those for the 18 months to 31 December 2009. If the profits have increased since 30 June 2009, the computations, and the accounts, will have under-provided for the tax. 9.7 There is clearly a strong argument that can be put forward that the accounts to 30 June 2009 did not understate the tax and that the apparent under-provision has only arisen due to an increase in profits since that date and the extension of the accounting period. However, the above exclusion puts the matter beyond doubt. 9.8 In addition to the above, there can be exceptional circumstances in which a change of accounting reference date can alter the abilities of a company to offset gains and losses. If there is a capital gain followed by a capital loss, then the two transactions can be offset if they both occur in the same accounting period. This facility is lost if the two transactions are divided between two accounting periods. In such circumstances the Buyer may state that he was obliged, under Section 390(5), Companies Act 2006, to change the accounting reference date in order to bring it into line with his own. It was therefore not a voluntary act. Again, the above exclusion provides clarity in this regard. 9.9 There is a related issue in respect of how stub periods from the Last Accounts Date to Completion are to be considered for the purposes of calculations relating to the tax covenant: for a stub period it can be helpful for a statement to be made to the effect that it shall be assumed that the stub period is a complete accounting period, commencing on the day following the Last Accounts Date and ending on Completion. This assists in providing certainty with regard to tax provisions in the Completion Accounts; it also assists in providing clarity in respect of Post-Completion Relief. If such an assumption is included it is then necessary to also state that it is assumed that
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