The Office of Tax Simplifications wants the Government to simplify the tax year. PQ magazine editor Graham Hambly looks at the arguments.\n\n\n\nThere are clear benefits in adopting a tax year that is either aligned with the calendar year or with a calendar month-end, says a new report from the Office of Tax Simplification (OTS).\n\n\n\nThis is especially true, it said, given the increasing automation,\ninternet-enabled commerce and digitisation of financial information and\naccounting systems generally.\n\n\n\nHowever, the costs of change are significant, both in terms of the\nfinancial cost and the opportunity cost. Whether moving to 31 March or 31\nDecember, the work involved would consume government and private sector\nresources and make it much harder to implement other changes at the same time.\nA move to 31 December could also require changing the UK\u2019s financial year.\n\n\n\nThe OTS stressed a tax year aligned to the calendar year would be\nthe natural, simplest and easiest approach for everyone to understand. It would\nalign with the approach in many other countries and support improvements in the\nuse of international data to help taxpayers in fulfilling their obligations. It\nwould also help individuals who move internationally (and, where relevant, their\nemployers) or who have overseas income.\n\n\n\nMoving to 31 March would also be much more understandable, align\nwith the UK\u2019s financial year, and assist taxpayers who prepare business\naccounts or report income from investments. The systems impact of such a change,\nfor government and the private sector, could be comparable with those for a\nchange to 31 December, but the overall scale of what would be involved in a\nchange to 31 March would be lower.\n\n\n\nThe OTS considers that any change would be best carried out after\nmajor projects such as the Single Customer Account have been completed. It\nwould in any case not be feasible to change the tax year end date before the\nscheduled 5 April 2023 start date of Making Tax Digital for Income Tax.\n\n\n\nWhile the OTS does not consider such a change should take place in\nthe immediate future, the OTS recommends that in the short-term the government\nand HMRC pursue ways to formalise arrangements to allow (or even require)\ntaxpayers to use a 31 March cut off to stand in for 5 April in respect of the\ncalculation of profits from self-employment and from property income, ahead of\nthe implementation of Making Tax Digital for Income Tax.\n\n\n\nBill Dodwell, OTS Tax Director said: \u201cIt\u2019s been stimulating to\nexplore this issue, which has been of long-standing interest to many given the\ncuriosity aroused by the UK\u2019s use of a tax year running from 6 April to 5\nApril. Despite our having carried out our review over a short period, many\npeople have got in touch to share their insights and experience. A clear\nmajority of those responding to us thought that the UK should adopt a different\nyear end \u2013 but there was a range of views on whether to move to 31 December or\nto 31 March. This has been borne out by a range of surveys.\n\n\n\n\u201cThere would be clear advantages from having a different tax year\nend date, but as the transitional costs and impacts are significant, it would\nrequire detailed advance planning. If government were to make a change, it\nwould also be important to ensure the timing did not derail existing change\nprogrammes such as work on the Single Customer Account. So, while we do not\nconsider such a change should take place in the immediate future, it is not too\nearly to start some long-term planning if the government were to consider\ntaking this forward.\u201d\n\n\n\n\u2022 Graham Hambly is the editor of PQ magazine\n\n\n\nHorrible tax\nhistory\n\n\n\nThe UK is\nvery rare in having a 5 April tax year end. The CIOT says the reasons for this\nunusual tax year dates back to the Middle Ages, when the tax year began on\n\u2018Lady Day\u2019 (25 March), a religious festival. It was moved to 5 April in 1752 as\npart of the UK\u2019s switch from the Julian to the Gregorian calendar, then moved\nto 6 April in 1800 because of a mis-match over leap years in the new and old\ncalendars. Most other countries, including the US, France, Germany and Ireland,\nalign their tax years to the calendar year.