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…why doesn’t the tax year start on the 1st January? Why the 6th April? Well you wouldn’t be the first to ask us. So we thought we’d fill you in…
What date would you pick? It’s not like there’s a ring to the 6th April, is there? As much as I love tax, I must confess to a “normal” human there it isn’t the most intuitive topic to follow. In fact, we will have to take you on history lesson to explain this further.
Tax Year Start
Our tax year dates originate from when people in England paid their landlords rent on the ‘quarter days’, i.e., 25 March, 24 June, 29 September, and 25 December. The first in the year, 25 March, came to be recognised as the start of the financial year, and originally kicked off the whole annual calendar.
Now in 1582, Pope Gregory XIII ordered a change from the Julian calendar (named after Julius Caesar) to the Gregorian calendar (you can probably guess where that name came from). The Gregorian calendar noted it actually only takes 365.2422… days for the Earth to orbit the Sun, instead of the 365.25… days (these small differences make all the difference in the world, literally!) that the Julian calendar followed. While the new Gregorian calendar was almost immediately followed by nations under Catholic control, England, as a Protestant country at the time, did not adopt the calendar immediately. In fact, it took us 170 years to follow suit.
These small differences quickly added up at a time when it needed to be in-synch with its trading partners thanks to it’s growing empire. In order to play catch-up, in 1751, the New Year’s Day became 1 January, meaning the English calendar for that year was just 282 days (from 25 March to 31 December). Then to allow for the extra 11 days, in 1752 the English calendar jumped from 2 September to 14 September overnight. Funnily enough the authorities still expected a full years’ business rates to be paid in both years, which didn’t prove popular. As compensation for this, 11 days were added to the tax year, taking it from 25th March to 5th April each year.
In 1800 this was changed again, in recognition of a skipped leap year, making it 6th April, that we still know and use today (can’t honestly say love).
Harmonisation and further technology to come?
With all things international and harmonisation, the phrase herding cats comes to mind. Whilst there has been significant progress on the converging of international accounting standards (don’t worry, I will spare you the detail, at least for now), there has been much less progress on the tax side. Many countries, including the United States, France, Spain, Germany and even British dependencies like Jersey, use the calendar year as their tax year. However, it doesn’t look like the UK will follow suit and with Brexit, this would perhaps prove even less likely to happen, creating more complexity for those trading across borders, with non-aligned tax jurisdictions when we should indeed be doing the exact opposite.
Making Tax Digital (MTD), is an attempt to embrace technology and propel to UK to the front of the digitalisation wave (or as a cynic would say HMRC will get more tax, from more people, more often). However, with the delays already confirmed in the roll-out here, who knows when this will come. The number of key tax dates don’t look like they will abate either. There are three different quarters for VAT (Jan/Apr/Jul/Oct, Feb/May/Aug/Nov and Mar/Jun/Sep/Dec), with three different deadlines and as the quarterly reporting under expands to income tax, buy-to-let landlords and housebuilders renting out rooms, this will increase further (quarters ending 5 July, October, January, and April). That’s before we think about corporation tax (there are currently 365 possible days in the year when there are requirements for filing for Companies) when rather than one tax return and one payment date, there will be four of these each year.
Maybe in the same spirit of simplification we embraced with decimalisation on 15 February 1971, we should take a step back and simplify the tax dates through the year. This could be a real opportunity which would help all businesses across the UK. For whatever reason all the tax simplification projects in recent decades have done the opposite with the tax legislation (as well as tax cases) growing by the day.
All these inconsistencies are confusing and increase probability of errors taking place. Whilst HMRC might benefit from more interest and penalties, it does not help businesses so is not in the interests of UK Plc overall.
Black and White Accounting
OK we have to confess, we are accountants, we are book keepers, we do like tax and maybe, sometimes we are a little geeky. However, that makes us great business partners for your business, as we can help you with the stuff you don’t like but we love. How does that sound? We can help navigate you through the accounting and tax quagmires and make sure you are aware and never miss a deadline again in the future.
We’d love to hear more about you, your business and how we can best support you, so please get in touch with us today by contacting Black and White Chartered Certified Accountants, populating the “Got a Question” form on the right, or calling us on 0800 140 4644.
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