Moving the tax year from April 5th to 31st march makes sense and should be agreed as soon as possible, say leading tax and advisory firm Blick Rothenberg.
Nimesh Shah, CEO at the firm said: “The Office of Tax Simplification’s (OTS) surprise proposal to consider moving the tax year end from 5 April to 31 March is a welcome move and should be endorsed.”
He added: “It makes complete sense to bring forward the tax year end date. Many businesses, companies and sole traders prepare their accounts to 31 March, and HMRC accept that a 31 March accounting year end can be used for filing a tax return. However, the majority of personal tax reporting needs to run to 5 April, which can cause administrative complications and transactions between 1 April – 5 April can sometimes be missed.”
Nimesh said: “The OTS notes that 31 March is the date which the UK government makes up its own accounts and references when certain corporate tax provisions apply e.g., the new corporate tax rates apply from 1 April.”
He added: “ The OTS report that changing the tax year end could have the effect of reducing administrative errors when completing tax returns and help to reduce the ‘tax gap’ – the difference between the tax that the Treasury should have collected and what is actually received.”
Nimesh said: “In a more dramatic move, the OTS is also considering whether the tax year should be moved to 31 December. The change would align the UK with the majority of developed countries, who run their tax year to the calendar year, including the US, China, Germany, France, Italy and Spain.
He added: “If the government took forward either of the OTS’ proposals, it would mark a historic change from the 5 April date, which has been the UK tax year end since 1800.
“The origins of the UK’s tax year date back to the UK adopting the Gregorian calendar in the late 1500s. Until 1752, the UK tax year started on 25 March (the old New Year’s Day) but as Britain aligned its calendar to the rest of Europe, and the Treasury not wanting to lose any tax revenue during that alignment year, it was decided to end the tax year on 4 April. In 1800, the Treasury moved the start of the tax year again to 6 April because 1800 was not a leap year in the Gregorian calendar but was in the previous Julian system.”
Nimesh said: “Whilst the OTS’ surprise proposal is very sensible, and arguably should have been tabled many years before, implementing such a change will come at a cost for HMRC and the taxpayer. Whilst the theory behind the change may make logical sense, the practicalities of making this important change to the UK tax system will be fundamental to its success. Unfortunately, HMRC’s record at making even minor system changes does not provide much confidence that a simple change to the UK’s tax year date will be seamless.”