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TAX OPINION: On changes to the filing deadline. By Simon Sweetman

5th Jun 2006
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While the accountancy profession exhibit collective horror over Lord Carter's recommendation that the filing dates for income tax self assessment should be changed, ordinary taxpayers seem unmoved.

You might argue that this is a proposal based more on our being out of line with the rest of the world than on any perceived difficulties with the present system. There is no reason to suppose that HMRC wanted the changes, so it all seems a bit unnecessary, hence accountants' objections. But for most self assessment taxpayers this is not going to make a lot of difference, although it changes the emphasis for many of the self employed in that it makes a 31 March year end less attractive.

So if accountants were going to be upset anyway, why not be seriously radical? The feature of the UK tax system that is really out of line with most of the world is that the tax year runs to 5 April.

And unlike the time given to complete a return, this does make a difference. An increasing number of taxpayers every year are working receiving pay in one country while resident in another, or possibly in both; or owning property abroad, and having to offset foreign tax against their UK tax liability. Almost everywhere the reference year for tax purposes is the calendar year, so if that was true for the UK then it would make calculations much simpler. When you go to work out the double tax relief available you often have to look for the tax charged on the same income; where the reference year is different that is a wholly unnecessary complication.

The fact that the tax year ends on 5 April is perculiarly British, along with warm beer and village duckponds. It is a hangover from 1752, when rents due on the quarter day on March 25 had to be delayed when we changed to the Gregorian calendar. Originally, the fiscal year ran to 25 March because that was the Roman new year, going back to the logical notion that the year began with the coming of spring.

But this change seems to be too awful for anyone to contemplate, like deciding to change to driving on the right. But is it? It makes no significant different to companies or to event-based taxes, and, effectively, we are only talking about income tax. There is even a precedent, in that Ireland, having inherited 5 April, managed to make the change without too much trauma.

I know that taxpayers do not want change, but that really means is unnecessary change - the sort of meddling in which a relieving measure is introduced in one year and then withdrawn two years later without notice. If we could change to the calendar year, then there will be no need to change ever again. As the world of work gets smaller and e-commerce develops, we are going to have to do this one day.

I realise that the accountancy profession will make the sort of fuss which would be appropriate if the Chancellor announced that he was going to shoot one in ten tax agents pour encourager les autres, and the Daily Mail will spot a European plot to undermine us and make us pay our tax in Euros. It is hard to see, though, how the rational among us could object.


Replies (17)

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By acountancy.lindsayandco.n
05th Jun 2006 16:52

Further to my earlier comments, I think it is essential not only to have letters of engagement, but updated letters of engagement accepting no responsibility if information comes in after a certain date, or is incomplete. Obviously in the name of good client relations a statement is made to the effect that we shall do our best in the letter.

If we do not cover ourselves with an appropriately worded engagement letter, I can forsee lots of claims being made against us for "negligence" when penalties interest and surcharges arise.

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Stephen Quay
By squay
05th Jun 2006 14:27

I object too!
I agree with Roxy Grimshaw word for word. I would also add that April is spent sorting out employer's annual returns. But yes, 90% of my clients are sole traders, partners and personal tax cases falling under the SA regime. Most have a culure of leaving it to the last minute whatever the deadline and educating them is hard work. Yes, they all think they're the only client so what's our problem. One client has a 30 April year end but I wont see his records until January 21 months later regular as clockwork - but it won't be the client's fault if he gets a penalty will it?!

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By lbeckett
05th Jun 2006 14:34

Complex Personal Returns
What year end? I work as a tax specialist and only deal with complex personal return forms to 5th April, for example capital gains, non-residents, employees and Lloyds underwriters. For some of these I have to wait ages for third party information. Will they let me prepare these to different times of the year? I think not!

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By edmundwright
05th Jun 2006 15:21

Filing deadlines-simplification is not joined up yet?
Perhaps the Chancellor could practice what he preaches and simplify the tax system? Remember the bad old days with only two rates of tax? If we had a simple system, the possibility of suddenly, with minimal warning, reducing filing times by 40% might not be the disaster it will be. Of course, we are missing wood for trees, think of all those extra late filing penalties!!

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By Robbas
05th Jun 2006 15:40

It is probably true that the filing date for individual taxpayers is not particularly relevent and the shortening may not effect them. For self employed people the situation is completely different as accounts etc have to be prepared. Many accountants not only prepare the accounts for small business' but also do the VAT, payroll, etc. I am one of those accountants and my work is spread across the current 10 month filing window. It is simply not possible to do all the accounts etc in the reduced time so I shall simply have no option but to ask some clients to leave my practice which I have spent the last 20 years building up. Of course any Revenue enquiries will simply have to wait until after the new filing deadline. Yet again a piece of legislation is being proposed by a civil servant who lives in a glass house surrounded by his early retirement, inflation proof almost non- contributory pension scheme funded by my clients and I

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By AnonymousUser
05th Jun 2006 12:26

I agree that a calendar year end would bring us in line with many other countries and if that was the aim of the Carter Review I would be in favour. Then we could have a November 30 deadline and gain an extra month to deal with the returns! I would even support a 31 October deadline with a December 31 year end. Either way I would at last be able to enjoy Christmas in a quiet period without increasing pressure at other times of the year.

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By geoffemtacs
05th Jun 2006 12:33

Summer Hols
Personally - I'd work backwards. If I have to have a period when I'm taking it easy, I'll have the Summer please.

So a 31/12 year-end and akin to the American system we can have a 30 June deadline, giving us the Summer to watch the cricket and see the world. Oh and in a World Cup year we could have a slightly earlier deadline of 31 May so we can watch the footy.

Not going to happen really is it? And neither is a change to 31/12 accounting..

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By acountancy.lindsayandco.n
05th Jun 2006 13:36

The professional press including accountingWEB has had much to say about the proposed changes. To my mind no real reason has been given or what will be achieved especially if the filing dates for company accounts is also reduced.

Whilst I can see a logic in changing from 5 April to say 31 December, if companies also have to change to that date, it will just make the situation a lot worse.

I am trying to educate my clients who each year get a bit later, that no I do not want to see them in December why not June. It does seem to be having some effect. However as many clients are self centred, I think they just think I am sitting at my desk waiting for their papers to arrive as I have nothing else to do!! One client did say to me not long ago that he would have to go to a bigger firm without realising that they too have the same problem but on a bigger scale

I think it essential that clients are warned that changes are coming the year after next and that with the pressures no undertaking can be made to complete on time unless information is provided at least FOUR months before the deadline. I do think that clients have to be made aware that sources are limited and and we cannot be responsible if they come iun at the last minute and have to pay penalties.

Of course clients could attempt their returns themselves. We would then end up with even more work as we try to correct the situation as a result of tax investigations.

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05th Jun 2006 13:09

Well, I do object!
SA100s are the bulk of my work. Nearly all my clients are sole traders, partnerships or personal tax clients, and since the arrival to self-assessment, I have ensured that almost all of them have 31 March year ends. I completed 166 2005 tax returns in the 9 month period May 2005 - January 2006 and worked at full capacity during the whole of this time. I rarely get any complete information for a client before May, and have very few clients that are VAT registered, consequently most clients only submit their tax documents to me in one piece. Even changing the self-employed year end will not affect the need for rental, PAYE and all other income to be gathered for the 5 April year end

I therefore have a very light time in February, March & April but am obviously needed to be available for possible Revenue enquiries. As a sole practitioner, I have a very personal relationship with all my clients and give them regular memory-jogging correspondence and telephone calls to get their tax information to me. Some people will always want to produce this quickly, but many will always drag their heels until the last moment, whenever that may be. Unfortunately this seems to be human nature.

I already submit all the returns electronically where the Government gateway will allow, but some do get rejected, sometimes unexpectedly, and have to be submitted by post, so iIf I were to be certain to save any of my clients a late filing fine, I would then need to submit all returns within the 5 month period of May to September. This is completely unworkable as I would not have the time to produce so many and I would then have 7 months with very little work.

Even with the change to filing by 30 November: I could hope that no FBI returns were rejected, and maybe be willing to be liable for the late penalty myself if rejected in October or November. This would give me a 7 month window of opportunity for completing all of them and my practice would still be severely affected. I work long hours, so consider working extra time would be potentially detrimental to the quality of my work, so do not see this as an option. Nor would I be prepared to take on a temporary assistant as I would lose the personal connection and certainty of accuracy. I would have to reduce my client base to make this workable, reducing my income, and I would also have very little earning potential in my chosen profession for the other 5 months of the year.

I think that if there is a strong need to get tax returns in earlier, surely an effective way to ensure taxpayers spend less time before submitting would have been to impose the shorter period at the same time as staggering the dates - maybe half of the taxpayers submitting by 31 January and the other half by 31 July, or even quarterly. I am sure that this would also relieve pressure on the Inland Revenue staff who must also be affected.

Surely I'm not the only practitioner to be affected in this way.

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By Accounting WEB
05th Jun 2006 12:09

filing changes - the fine culture
One very good reason that HMRC want to keep a plethora of different filing dates is the simple fact that this helps maximise fines for late filing! Harmonising tax year end & other filing dates can only streamline the system & lead to lower income from fines and penalties.

No matter how "friendly" the taxman tries to appear, the reality is that from speed cameras to late filing penalties for companies and individuals, the fine culture is with us to stay - and it plays a significant part in plugging Brown's spending gaps. Pity the entrepreneur who is subject to both!

Given this, it is more likely that other countries will take not & change their tax years to 5th April!

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By adbanks
07th Jun 2006 09:43

In the meanwhile
Whilst I can understand (to some extent) the predicatble howls of protest at the thought of moving to 31-Dec, there is a simpler short term fix:

Alight the personal tax year (5-Apr) with the corporate tax year (31-Mar)

There is no justification for maintaining the two seperate dates.

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By Helen Crowley
06th Jun 2006 09:48

Cunning plan?!
So how about in April/May we just lodged estimated returns for all of our clients. We can then repair the returns manually (as they can't be lodged electronically), at our leisure, by the following September. HMRC would go into melt down as there is no way they could handle the ensuing volume of manual repairs. They might listen then when they too don't have the workforce to cope!
Also bear in mind that some wealthier clients won't mind paying the £100 fine for the privilege of taking their time getting their information together - it's better than paying for the tax returns to be completed at our overtime rates! It would spread the workload for us too!

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By adam.arca
05th Jun 2006 17:28

Don't agree with Simon
Coming back to Simon Sweetman's actual proposal, I couldn't disagree more with any idea of moving the tax year end from 5/4.

It may seem a bit quaint, but that is part of the (distinctly receding) charm of living in this country. Are we also going to abolish warm beer and duckponds (the two other examples given of non-modernism)?

Whilst 5/4 isn't the year end you'd choose if starting with a blank sheet, the fact is we do have historical baggage as a country and the date does have historical validity.

I can't even begin to imagine the hassle of an enforced changeover. The example given of Ireland is a complete red herring: the UK must have 10 times the headcount and a Revenue service which appears about 10 times as inefficient. So what if moving the year end would assist people with DTR issues? That must involve less than 1% of tax returns. Using that logic as a starting point would also mean that we should start driving on the right and inconvenience 99.9% of drivers just to accommodate the minute fraction of foreigners who might be driving on our roads at any one point in time.

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By cullis
05th Jun 2006 17:31

The US system has something to teach us
If our US 'cousins' can achieve tax filing in 105 days, why cannot we do likewise? From my personal observation, it is all about organsiation.

One key factor in enabling the US system to function is the provision that a return may be filed late without penalty providing all tax is paid by 15 April, the filing date, and an extension is applied for. For taxpayers with complex returns this provides plenty of wiggle room for filing at leisure.

Surely, the real interest of HMRC and government is to collect tax earlier and to give themselves more time to review and audit returns?

The US system works, although the ability to plan, prepare and deliver during the winter months and take the summer off is undoubtedly an important factor. Another contributor to success is the availability of armies of part time workers - who like the summers off! So a change to 31 December year end is essential.

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By Anonymous
06th Jun 2006 13:28

Do more work off-peak / less at peak time
Where clients have their VAT returns prepared quarterly by myself I try, where practical, to get the bank and cash balanced at the same time. This way, the reconciliation part of the job is spread evenly over a year leaving less to do at the financial year end.

I think fresh thoughts need to be addressed at the 30th April year end (disfavoured by many because of overlap profits, etc.), which I am now even more in favour of.

Then look at those potential limited company clients where in some cases limited company status was advised against as the 10 months deadline was unachievable because of the nature of the client; such clients had to forego the tax benefits of incorporation as 10 months was too short a time to get accounts prepared. Faced with the choice of sole trader 8 months deadline or limited company 10 months deadline the business format issue for such clients may need revisiting.

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By medwards1
06th Jun 2006 01:15

Completely Impractical
We are flat out as it is without trying to cram several more months of work into a reduced filing period. Am i supposed to tell my staff that they can't take summer holidays? Another example of thoughtless unnecessary tinkering proposed by individuals who are unlikely to appreciate the difficulties faced by the small practitioner.

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05th Jun 2006 17:26

California Dreaming
The idea of having the ability to operate a website where my clients log in securely online and provide me with quarterly or monthly information sounds absolutely wonderful. Unfortunately many of my clients would be unable to comply with this. A number are not computer literate and some still do not own such an item of equipment. In many cases they do not understand the information that is required now and relevant matters are only picked up due to the eagle eyes of the person working on that job. To place the onus on the client to understand precisely what level of information is required by us in order to ensure that the accounts and Return accurately reflect the true situation? As much as I like many of my clients I am afraid to say that in most cases this would be beyond their abilities. For small practitioners dealing with very small self-employed clients this really is dreamland.

My practice is also made up of small sole traders, partners and personal tax cases. The pressures and problems are almost identical to those already outlined below and, like Roxy, my client's year ends were all changed to 31 March/5 April, as encouraged by HMRC. The shortening of the deadline would be a disaster to my practice, for reasons far too numerous to list here.

Roxy's point regarding Returns rejected by the Government Gateway raises a further potential practical problem. Will HMRC be issuing paper Returns to every taxpayer rather than the notice to deliver that is currently issued in many cases? And if they do not intend to do so, will they issue a guarantee that a request for a paper Return will result in this being delivered to me within 48 hours of the request? As I understand things, it is currently proposed that computer facsimile Returns will no longer be authorised under the new system and therefore a hand produced Return will only be accepted if it is on the original paper Return. If no such paper Return has actually been issued then how will the Return be prepared where this isn't discovered until the end of September or later?

I agree that the majority of ordinary taxpayers are at present unmoved by the proposals to amend the filing deadline. I wonder whether they will be similarly unmoved when this becomes a reality and starts to actually affect them. I also wonder whether they will feel as relaxed when penalties start to become a reality and the payment deadline is brought forward - or are we all still naively believing that this will not shortly follow any deadline change?

And I have to say that I quite like the fact that we are not in line with the rest of the world and I also have a fondness for warm beer and village duckponds - as Mr Sweetman says it is peculiarly British and long may it stay that way!

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