The Office of Tax Simplification (OTS) is reviewing the benefits, costs and wider implications of a change in the date of the end of the UK tax year for individuals.
It will publish a report of its findings during summer 2021. The review comes after Rosie Bullard, portfolio manager at wealth manager James Hambro & Partners told International Adviser that UK tax year end date is “chaos” for multi-domiciled clients.
In carrying out its assessment, the OTS will:
- Consider the implications for the Exchequer, the tax gap and compliance generally, in particular in relation to income tax, PAYE, National Insurance contributions, capital gains tax and inheritance tax;
- Consider the financial and administrative implications for taxpayers, employers and businesses – consider the practical implications for HMRC including the operation of their systems;
- Consider interactions with other government departments and devolved administrations;
- Reflect on implications for areas connected to individuals, such as partnerships and trusts;
- Consult with the Administrative Burdens Advisory Board; and,
- Take account of relevant international experience.
The OTS said in a statement: “The UK’s tax year for individuals runs from 6 April to the following 5 April. This is for historical reasons and has been the case for hundreds of years; the UK’s modern tax system and infrastructure have been developed around this date.
“By contrast, accounting systems used by businesses have been developed around month and quarter ends. Across businesses and internationally, it is common to account to a month end date.
“Many countries use 31 December for their government accounts and the two most popular accounting dates for multinationals are the calendar year end date of 31 December and 31 March. The UK financial year for government accounting and for companies runs from 1 April to 31 March.”
31 March
The OTS is assessing the implications of moving the tax year end date from 5 April to two dates. The first one is 31 March.
This is both the end of a calendar quarter and the nearest month end date to the end of the current tax year.
It is also the UK financial year end date, to which the UK government makes up its own accounts, and by reference to which corporation tax rates apply.
The OTS said: “Changing the tax year end to 31 March would mean the transitional year – the first year of the change – would be shortened by five days and run from 6 April to the following 31 March.
“As well as considering the implications of changing the tax year end to 31 March, the review will also consider potential alternative approaches to addressing practical issues connected with the UK’s tax year running to 5 April.”
31 December
In addition, the OTS will outline the main additional issues, costs and benefits that would need to be considered if the end of the tax year were moved to 31 December.
It added: “Many major tax regimes including the USA, France and Germany have a tax year end date of 31 December.
“Ireland moved its government accounting and tax year ends from 5 April to 31 December in 2002.
“In this case, the transitional year would be shortened by three months and five days and run from 6 April to the following 31 December.”
