Do you have any thoughts for OTS? - on ...

Review of potential for moving the tax-year end-date!

Didn't find your answer?

A meeting I'm attending in just over a week has just had a new agenda item added ... so that OTS can solicit input for the above review.

The extremely limited info published so far on the consultation is at https://www.gov.uk/government/publications/ots-to-explore-potential-for-... ... in essence giving the scope as:

  • the tax year in question is only the one for individuals
  • the objective is to identify the optimum alternative date that happens to be a month-end (preferably a quarter-end)
  • they initially lean towards the "UK financial year used for govt accounting" (1st April to 31st March)
  • the primary focus is on tax simplification issues, but will also consider impacts on tax credits and benefits
  • the plan is for OTS to publish a report 'over the summer'

There will obviously need to be considerations, if this change were to happen, around calculation/reporting/payment processes during the 'transitional' tax year ... but I'd appreciate ANY comments, thoughts, suggestions that could be put forward to the OTS - in terms of likely impacts (beneficial or otherwise) longer-term.

  • NOTE: In carrying out its review, 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
  • take account of relevant international experience.

No pressure - but I'm really keen to proffer views that are not merely those that occur to me!

Replies (26)

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By Calculatorboy
05th Jun 2021 14:16

It makes sense to go with calendar year end ..December , and no exceptions

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Tornado
By Tornado
05th Jun 2021 14:47

I did see this and thought the remit was a bit general and the time scale a bit ambitious for a full report by the summer, but the fact that this is being looked at seriously at all is to be applauded.

The joke that is MTD with a tax year end of 5th April was always going to be a barrier to the UK having the best Digital Tax System in the world, and this matter should have been addressed years ago.

There are many potential problems with such a change, of course, but I think these would more likely be for the Government to deal with than for us, as most people work to monthly financial periods anyway and have to spend additional time adapting to the 5th April requirement.

What we do not want is for all affected people to get involved with complex calculations to get rid of the odd 5 days (to 31st March) and then perhaps have an adjustment amount hanging around forever, like Self Assessment Overlap Relief (not index linked) which still affects some of my clients as it would be very expensive in tax terms to eliminate it.

As with many things, the simpler the solution, the better the result will be.

What is abundantly clear, however, we cannot seriously continue with a tax year end of 5th April.

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By David Ex
05th Jun 2021 15:38

I haven’t followed the work of the OTS. Have they ‘delivered’ anything significant?

I’d be interested to know what their view is of MTD for IT, as it certainly doesn’t scream “simplification” to me.

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Replying to David Ex:
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By Hugo Fair
06th Jun 2021 01:07

Well they're independent (of any particular ministry) in terms both of personnel and thinking ... but they can't choose topics for investigation; they have to be commissioned for a specific aspect (which they sometimes suggest) of Taxation within a set of ToR.

I'm fairly sure therefore that MTD for IT has not been passed to them for review, but will be happy to suggest it (albeit 'offline').

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Replying to Hugo Fair:
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By David Ex
06th Jun 2021 10:45

Hugo Fair wrote:

I'm fairly sure therefore that MTD for IT has not been passed to them for review, but will be happy to suggest it (albeit 'offline').

Not being over dramatic but if something (MTD for IT) as widely accepted to be a complete waste of time is implemented, it does suggest that the OTS is an expensive (presumably) and pointless gesture.

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Replying to David Ex:
Ivor Windybottom
By Ivor Windybottom
07th Jun 2021 11:38

OTS has delivered on Luncheon Vouchers. Not sure I can point to anything else more significant, despite all their reviews and reports.

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Replying to Ivor Windybottom:
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By Tax Dragon
07th Jun 2021 12:14

Depends on your perspective. (Instant gratification v Chinese long-game.)

Just because something isn't implemented immediately in full doesn't mean it has no effect on subsequent changes and policy decisions.

Once tax years are abolished, the talk of changing the year end will, in hindsight, seem rather bizarre.

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By Jo Nokes
05th Jun 2021 15:42

It is of course, completely absurd that a modern economy such as ours has tax months and years, ending on the 5th. Ideally, I would say the calendar year basis would be best, but the least disruption would be to say the 5th April moves back 5 days to 31st March, and all Paye months use calendar months.

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By Paul Crowley
05th Jun 2021 18:42

HMRC consider that 5th April and 31 March are effectively the same anyway.
But only for accounts reference periods
CIS and PAYE and Dividends and interest paid or received must all follow the odd date.

Best left alone as HMRC would want a complicated change over set of arrangements that would do nobody any good.

Lets have a 20 year moratorium and decide 15 years afterwards.
By then I could just look down at laugh about the 5 year period of chaos.

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Replying to Paul Crowley:
Tornado
By Tornado
05th Jun 2021 20:49

"CIS and PAYE and Dividends and interest paid or received must all follow the odd date."

Not if the odd date was changed.

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By Tax Dragon
06th Jun 2021 00:04

What?! 5 fewer days for year-end planning?! Nooooo!

I suppose if you did it bit by bit... keep the tax year at 365 days even when there were 366 days in the calendar year, it might just work. DJKL taught me about Högertrafikomläggningen. Stage one was the unmetalled roads. Then 4 years later the C roads. Then the Bs, the As and finally the Mways. Imagine the carnage if it had happened all at once.

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Replying to Tax Dragon:
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By Hugo Fair
06th Jun 2021 01:18

Well it's nice to keep learning new things (and you've certainly increased my sum total of knowledge with that piece of Swedish history). However I presume that your description of the phased implementation is but a good joke?

According to Wiki:
"On Dagen H, Sunday, 3 September 1967, all non-essential traffic was banned from the roads from 01:00 to 06:00. Any vehicles on the roads during that time had to follow special rules. All vehicles had to come to a complete stop at 04:50, then carefully change to the right-hand side of the road and stop again (to give others time to switch sides of the road and avoid a head-on collision) before being allowed to proceed at 05:00".

Horrendous sounding, but actually resulted in a reduction in number of accidents (until things settled down and drivers became as carefree as they'd been before)!
And certainly better than trying to remember the class of road on which you're driving - and coping with change as you merge onto a different class of road - or was that the point you're making?

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Replying to Hugo Fair:
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By Tax Dragon
06th Jun 2021 07:22

I'm not sure I was making a point. Just giving my GSOH another outing, with not one but two fine (but clearly impenetrable, being cloaked with dragon skin) jokes.

By strange coincidence, a few days ago while rummaging around the back of the cave to assess its suitability as a third den, I came across an old newspaper clipping Mum had saved (she used to do odd things like that - no comments please) about how we came to have a tax year end of 5 April. I recall having seen separately about riots when people's lives were shortened by 11 days. This led me to joke 1, poking a bit of belated fun at the rioters with my mock anger about having 5 fewer days at the end of every year. (Although actually it would be true for one year in whatever year it happened... assuming "it" means adopting 31 March as a year end, which I picked up from the replies (didn't read the link, sorry)... so now I really am angry!))

The H day joke was no more than a bit of farce. Which actually is how I view this debate. I don't get much past the "why?" response of your sun-drenched friends. I'm not aware that the 5th April year end has massively held back Britain's international trade and relations, nor slashed its GDP, as Tornado seems to imply. (If not that, then I miss the point.) Nor am I aware of the ridicule of which Jo Nokes speaks, though I do live a fairly secluded (some might say sheltered) life in Dragon Cave.

Is there an obvious reason why we should this? (Or indeed why not? I'm not seeing one either way. If it ain't broke, and all that, is the best I've got.)

Final* joke**: Maybe when China takes over the world it'll abandon its use of western years and we'll all have to get used to years of varying length that end in what we presently call 'February'.

*No promises
**I hope

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Replying to Tax Dragon:
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By Tax Dragon
06th Jun 2021 07:33

Maybe the financial loss is caused by the waste of time of constantly discussing it? Maybe if we spent the one-off dosh to change it we could all move onto more productive uses of our time?

Or maybe the muscular strength that this gives to our jaws stands us in good stead for negotiating trade treaties? (i.e. maybe it's good to have things that don't matter to argue about as practice for those that do.)

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Replying to Tax Dragon:
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By Tax Dragon
06th Jun 2021 07:36

Tax Dragon wrote:

maybe it's good to have things that don't matter to argue about as practice for those that do.

Finally I understand the raison d'être of Aweb.

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Replying to Tax Dragon:
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By Hugo Fair
06th Jun 2021 14:51

Good jokes actually ... just a shame that some of the audience needs much clearer signposting (due to its literalist bent)!

BTW, be careful when you invoke stories of China's plans for western years ... they are capable of playing the long game and may have some real treats in store for us.
I particularly enjoyed an article I've just read (in New Scientist) about potential for decimalising our measurements of time. Apparently, until 1645 China had a decimal time system that went back millennia. It was the arrival of the Jesuits that brought the 'western' method ... but it probably still rankles in some part of the Chinese psyche.
[The 'western' method should more accurately be called either the Babylonian or Egyptian method - both of whom used a sexagesimal system, with a base of 60, that is the basis of degrees in a circle, and of (inaccurate) days in a year, as well as seconds in a minute and minutes in an hour].

Back to the OTS ... if it ain't broke is as far as I'm getting at the moment, so the meeting may turn out to be shorter than usual!

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Replying to Hugo Fair:
Tornado
By Tornado
06th Jun 2021 22:58

'if it ain't broke is as far as I'm getting at the moment'

I can agree with that when it comes to MTD. We already have a Self Assessment System that works well, so why change it.

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Replying to Tornado:
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By Tax Dragon
07th Jun 2021 06:54

I was hoping you and/or Nokesie would post back - but to answer Hugo's question, rather than continue the off-topic anti-MTD trolling.

Fast forward 50 years with nothing changing. Which looks more antiquated, with the benefit of hindsight - continued use of 5 April as a year end [do please explain what the downsides of that would be], or business submitting details of income and outgoings between 12 and 22 months* after the income was earned/received or outgoing incurred/paid?

Maybe what needs to change most - though of course this is the hardest thing for the government to do - is that the basics of the tax system are modernised** so that it's fit for the digital age. That's the MTD discussion I think needs to be had - not whether MTD happens, as surely it must.

*Of course, some income and outgoings already have a much more realtime reporting deadline. You can probably add to my starter for 10: RTI. But what I was really thinking of was reporting regimes such as DoTAS and its EU sibling DAC 6 (the domestic rules for which, though the UK has left the EU, remain in force in modified [OECD compliant] form). But this is a further distraction - I cite these rule sets merely as examples of cases when reports may be needed within days and weeks, rather than months and even (nearly) years.

**Changing the year end should be part of that larger review, not a standalone exercise that appears (to me at least) to be a pointless waste of time when undertaken in isolation.

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By Hugo Fair
06th Jun 2021 00:56

Whilst I understand a natural caution (even reluctance) to face a year - or longer as per some suggestions here - of a transition period; I had naively hoped that some of you would identify potential benefits or detriments that would follow in a full year of 365/366 days (i.e. in subsequent years).

It might be obvious, but I asked a group of intelligent (but non-accountancy) friends this afternoon for their thoughts, without any responses progressing much beyond "Why?"
That may be a result of the brain-boiling sunshine (or more likely simply a reflection of the boredom quotient of the question), but it is quite hard to see what enormous perceived benefit lies behind the proposal - or indeed what major pitfalls would await us if implemented.

I'm looking at things like the interaction/overlay of different submission dates for different taxes (and even considered the conflict with Christmas or Easter holidays), but I seem to be missing 'the obvious'! Please lead me towards the light ...

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By johnhemming
06th Jun 2021 12:49

Another option,of course, is to revert to the Julian calendar and have the year start as it used to on 25th March. Then the calendar year would be the same as the tax year.

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Replying to johnhemming:
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By Paul Crowley
06th Jun 2021 15:30

The last change of calendar year gave problems arising on time based contracts. The riots were real as there were profiteers, all of whom were rich landowners wanting double rent.
HMRC just would not be able to resist the opportunity, given that tax works in years.

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Replying to Paul Crowley:
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By johnhemming
06th Jun 2021 17:03

Paul Crowley wrote:

The last change of calendar year gave problems arising on time based contracts. The riots were real as there were profiteers, all of whom were rich landowners wanting double rent.
HMRC just would not be able to resist the opportunity, given that tax works in years.


That, however, was the reason for the change of date from 25th.
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Replying to Paul Crowley:
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By adam.arca
07th Jun 2021 17:48

I hadn’t heard that, but it makes sense that there were 18th century Rachmans.

Weren’t the riots more about people “losing” 11 days of their lives when they believed that God had a particular date in mind for their shuffling off?

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By Paul Crowley
06th Jun 2021 15:25

I would not trust HMRC to manage change like this based on every change to date by HMRC.
So many rules will be put in place with punishments and penalties out of proportion to the errors made.

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Northumberland flag
By MJShone
07th Jun 2021 07:54

31 December ties in with most of (?) the rest of the world. As to how to do it - ask the Irish. They did it about 20 years ago.

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By adam.arca
07th Jun 2021 13:44

Well, I'm in the "if it ain't broke" camp and a) can't really see the need and b) wouldn't trust HMRC to get it right.

Yes, 5 April is a bit bizarre but there's a valid historical reason and I've always thought it to be quaint and rather British, a bit like Beefeaters and Trooping the Colour.

If we have to change, then 31 March would be least impact. As for compulsory financial year accounting, that's a horrible idea straight out of the proto-fascist playbook.

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