91% of SMEs support change to tax year
A survey by accountancy firm BDO found that 91% of mid-sized businesses overwhelmingly support a change to the tax year from 4 April to 31 December.
Nine out of 10 mid-sized businesses believe that this is the right time to change the date after the Office of Tax Simplification (ONS) announced in June that it was considering moving the date.
Businesses believe that this change would help simplify the tax system and bring it in line with the global community as the UK is currently alone in ending its tax year on 5 April. Ireland had previously shared the tax year dates but this changed when they joined the EU in 2002.
BDO’s survey also found that 50% of businesses would like the government to introduce better research and development (R&D) tax breaks for all sized businesses with 53% of businesses leaders wanting to see the super deduction policy become permanent.
Paul Falvey, tax partner at BDO, said: ‘Businesses are hoping that a rethink of the tax system can help them flourish following the challenges of Brexit and Covid-19. Changing the tax year to 31 December is supported by businesses of all sizes and will be particularly helpful for those with international connections.
‘Clearly there will be challenges associated with implementing this change, not least for the government itself. But in the long term, a 31 December year-end would also make life simpler for HMRC.
‘Aligning the year-end with more of the international community will help taxpayers to calculate and HMRC to check that the correct amount of tax is paid by those doing business in more than one country.’
Until 1752 the UK tax year started on the 25 March, which was formerly the date of New Year’s Day. The date jumped forwards when Britain changed to the Gregorian calendar and in 1800 the Treasury decided that the tax year would end on 5 April.
The OTS is seeking feedback on two options, either moving the end of tax year date to March 31 as it is both the end of a calendar quarter and the nearest month end date to the end of the current tax year. The other option is to run the tax year to December 31, similar to the US, France and Germany. Should the latter option be pursued, the transitional year would be shortened by more than three months and run from April 6 to the following December 31.