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ESG Diligence: The Key To Sustainable M&A Transactions
AAB / Blog / Is the end nearing for the Tax Year as we know it?
BLOG6th Jul 2021
The UK tax year runs to 5 April, however, The Office of Tax Simplification ‘OTS’ recently published a document (June 2021) setting out its intention to review the benefits, costs and wider implications of changing the end of the tax year to either 31 March or 31 December.
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.
In addition, the OTS will outline the main additional broader issues, costs and benefits that would need to be considered if the end of the tax year were moved to 31 December. 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.
The OTS said: “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. The UK financial year for government accounting and for companies runs from April 1 to March 31.
“While primarily addressing tax simplification issues, the review will also take account of the implications of any change in other areas, such as in relation to tax credits and benefits.”
In carrying out its review, the OTS said it will consider the implications for the Exchequer, the tax gap and compliance generally, in relation to Income Tax, PAYE, National Insurance contributions, Capital Gains Tax and Inheritance Tax.
It will also consider the financial and administrative implications for taxpayers, employers and businesses and the practical implications for HMRC including the operation of its systems and reflect on implications for areas connected to individuals, such as partnerships and trusts and take account of relevant international experience.
Whilst the change of Tax year end date is to be reviewed there is no doubt that the move to ‘Making Tax Digital’ effective from April 2023 which will see quarterly tax reporting for the self-employed, property landlords and partners of partnerships, will have been a key driver behind the decision of the OTS to review the position. The shift in year end date would mean an alignment with many trading year end dates and VAT quarters to the tax year which would provide a more streamlined approach to filings for both tax professionals and the taxpayer.
A report of the findings by the OTS is expected to be published over the course of Summer 2021.
If you would like to discuss any of the above please get in touch with Carol Edwards or your usual AAB contact.
How AAB can help
Our team support a diverse array of individuals such as employed professionals, business owners, families and international sports stars. As AAB clients, they all benefit from absolute confidentiality and share a unified goal of optimising and safeguarding their personal wealth. Our services extend far beyond mere tax return completion. In addition to standard personal tax compliance, our dedicated team of personal tax specialists delivers dependable and practical tax advice, ensuring full compliance and optimal positioning.
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