Small business owners are overwhelmingly in favour of changing the tax year to the end of December to simplify the system.
In a survey of 500 small and medium-sized businesses, 91 per cent supported moving the date for filing tax affairs, according to accountancy firm BDO.
Companies said that the transition would have to be planned carefully, with longer deadlines to accommodate the change, but they supported the inevitable short-term disruption as it would make the UK tax system fit for the 21st century.
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The British Chambers of Commerce (BCC) told the Financial Times that moving the small business tax year could simplify the accounting process, but cautioned that care should be taken to ensure the adjustment did not encumber companies with extra bureaucracy.
Paul Falvey, a tax partner at BDO, told the Times: “Businesses are hoping that a rethink of the tax system can help them to flourish following the challenges of Brexit and Covid-19. Changing the tax year to December 31 is supported by businesses of all sizes and will be particularly helpful for those with international connections.”
The UK tax year for individuals runs from April 6 to the following April 5 and that has been the case for hundreds of years, but modern businesses typically use accounting systems which have been developed around the ends of months and quarters. The financial year for UK government accounting and for companies runs from April 1 to March 31.
>See also: All small businesses to go Making Tax Digital by 2024, Treasury suggests
The UK’s idiosyncratic tax date is a result of historical accident, and partly due to the removal of 11 days from the calendar when the country shifted from Julian to Gregorian systems in 1752.
In June the Office of Tax Simplification said that it was exploring shifting the end of the tax year from April 5 to either March 31 or the end of the calendar year.
In recent months, professional bodies, including the Institute of Chartered Accountants in England and Wales and Chartered Institute of Taxation, have been pressing the UK government to consider switching the end date to March 31 or December 31.
The ICAEW told the FT that feedback from its members suggested most were in favour of aligning the calendars.
Further reading
Super-deduction tax break – what is it and how does it work?
The last thing I want to be doing in the run up to the very busy Christmas period is doing stock takes of increased stock levels and then the accounts over the Christmas holidays and just after.