OTS to consider “benefits and implications” of moving tax year end date

The Office for Tax Simplification (OTS) will explore whether there is a case for moving the UK’s tax year end date.

Announcing the review, the office, which provides independent advice to HM Revenue & Customs (HMRC), suggests that aligning the tax year end with the financial year end could reduce financial and administrative burdens for taxpayers.

The UK’s tax year end currently runs from 06 April to the following 05 April due to “historical reasons” and has been the case for “hundreds of years”, said the OTS.

But most modern accounting systems used by businesses have been developed around month and quarter ends. For example, the two most popular accounting dates for multinationals are the calendar year end date of 31 December and 31 March. The UK financial year end for companies also runs from 1 April to 31 March.

In the review, the OTS said it will explore the benefits, costs, and wider implications of moving the tax year end date from 5 April to 31 March – effectively shortening the first tax year under the change by five days.

The review will also consider the impact of changing the tax year end date to 31 December – the day currently used by tax regimes including the USA, France, Germany, Ireland (who changed its year end date in 2002 after adopting the Euro), and even Jersey, a British dependency.

The OTS said the outcome of the review will be published this summer and passed to HMRC for consideration.

The announcement comes after the Institute of Chartered Accountants in England and Wales (ICAEW) suggested in February that post-Covid recovery was a “good time” to move away from the 05 April tax year end date.

“Alongside the government’s stated desire to ‘build back better’, using the fundamental changes brought about by the coronavirus pandemic to rethink outmoded policies and business practices, the UK has a 10-year strategy to modernise its tax administration system, embracing digital technologies wherever possible,” said the ICAEW’s Anita Monteith.

“To deliver these goals then some radical changes need to be made and shifting the end of the UK’s tax year to 31 December could provide a way to not only simplify processes for taxpayers and the authorities, but also provide the benefit of international alignment.”

She added: “Individuals and businesses transact across borders all the time but it is unnecessarily cumbersome to have to deal with non-aligned tax jurisdictions. Added complexity means more time, more mistakes and generally increased compliance cost.”

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Posted in Blog, Tax.