Earlier this month the Office of Tax Simplification commenced an exercise to consider the benefits, costs and other implications of moving the tax year-end for individuals and partnerships, to align with that for many companies.
Currently, the tax year runs from 6 April to 5 April, and personal tax computations and returns are prepared for that period. That has been the case for hundreds of years.
However, most companies account to either 31 March or 31 December, in their accounts and corporation tax returns. Most accounting software packages also use month and quarter ends.
In its review, the OTS is therefore considering shortening the tax year-end by 5 days from 5 April to 31 March. Another option being considered is to move the tax year end to 31 December which would result in a transitional year shortened by three months and five days. Many other countries in Europe, including France and Germany, already use 31 December as their tax year-end, as does the USA.
“Arguably a change to either date would be an inconvenience, at least initially, and certainly in any transitional year.
“The OTS will be considering compliance generally, including income tax, PAYE, national insurance, capital gains tax, and inheritance tax. There could be complications where profit averaging or herd basis accounting is used. We hope that the OTS will consider these provisions that are particular to the farming sector.
“Given the Basic Payment Scheme years runs from 1 January to 31 December, a move to mirror the calendar year could make sense for the farming sector.
“Clearly, all the implications are yet to be considered, and it will be interesting to see what the OTS comes up with.”
The results of the OTS review will be published later in the summer.