We Brits delight in our eccentric ways — even if it defies the logic and common sense that other countries display. Our quirkiness even extends to our tax year-end date: 5 April.
Yet a poll conducted by international accounting firm BDO has found that 91% of medium-sized businesses support simplifying the tax system by changing the date to 31 December — bringing it in line with the end of the calendar year and the rest of the world.
You may think that someone at Her Majesty’s Treasury plucked this random spring date out of thin air. Yet it stems from the UK shifting from The Julian Calendar, which had been in place since 46BC, to The Gregorian Calendar in 1752 — resulting in 11 fewer days in the year.
Removing the headaches of non-aligned tax year-end dates would undoubtedly be a welcome move for many businesses that transact across borders.
“A change of the government’s financial year to 31 December would mainly impact when corporation tax rates might change for companies”, said Easy R&D’s Tax Partner, Yolande Van Niekerk.
“Currently, corporation tax rates are set to increase to 25% from 1 April 2023, which might change to 31 December 2022.
“If you’re claiming R&D tax credits, you might want to carry forward your losses instead of claiming the 14.5% R&D tax credit, which is the amount you can claim back on surrenderable losses.
“If you’re expecting a profitable 2022/23, you’ll save more tax by carrying forward the loss, which can be set off against profits that would otherwise be taxed at 25%.
“In terms of practicalities, a change in the fiscal year shouldn’t have a huge impact on R&D claims”.
The UK stands alone in ending its tax year on 5 April. Ireland previously shared the same tax year dates but changed them after joining the euro in 2002.
The government’s research and development (R&D) tax credits scheme has the power to transform your business and absolutely any industry can claim. You can find out if your business is eligible by getting in touch with us here.