UK should change the tax year end and date, says CIOT

The CIOT has suggested that the UK’s ‘quirky’ 6^th April – 5^th April tax year should be moved to a more ‘modern and logical tax year’.

This comes after a recent publication released by the Office of Tax Simplification (OTS)^, which states that there would be ‘clear advantages from having a different tax year end date’.

According to the OTS, keeping a 31^st December year end would be a long-term option, however, with regards to the short-term the government should enable self-employed taxpayers and individual landlords to use the 31^st March in place of the 5^th April when reporting their income.

Interestingly, the UK’s tax year system is rare compared to most other countries, such as the USA, France and Ireland, aligning their tax years to the calendar year.

John Barnett, Chair of CIOT’s Technical Policy and Oversight Committee, commented, “The government’s 10-year review of the UK’s Tax Administration Framework is a golden opportunity to ‘think big’ about modernising the UK’s tax system and for the government to consult on moving the tax year end from 5 April – either to 31^st March or 31^st December.

“In CIOT’s view it is time for the UK to make this change. Retaining a 5^th April tax year end makes life harder for taxpayers and increasingly complicates interactions with other countries’ tax systems.

“However the government should proceed carefully. Changing the tax year should be a longer term plan – perhaps over four or five years – because there will be costs and transitional rules to address and individual taxpayers, businesses, tax advisers, accountants, HMRC and other government departments will need time to prepare. A cautious approach is also needed to avoid confusing and overwhelming taxpayers because of ongoing reforms such as, potentially, basis period reform in 2022 – which involves changing the time period for which a sole trader or partnership pays tax each year – and Making Tax Digital for Income Tax Self-Assessment which starts in 2023.”