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Tax year end
Following our article on the history of the Budget, ‘Little bag’ (Taxation, 23 March 2023), Alan O’Brien got in touch to share with us some of his research on the history of the change to the end of the tax year. He writes:
‘In the article it is stated that when the Gregorian calendar was adopted “the tax year end was extended from 24 March 1753 to 5 April 1753”. I think this is incorrect. Eleven days were omitted from September 1752 by calendar reform. Adding eleven days to a year end of 24 March produces a year end of 4 April, not 5 April.
‘At the time of the Gregorian calendar reform there were two taxes charged by the year: land tax and window tax. There was of course no income tax in the 1750s. Those two taxes accounted for about 20% of government revenue; the rest came from customs and excise taxes which were not charged by the year but by the item—barrel of brandy etc.
‘Both land tax and window tax applied for a year which the statutes said ran from 25 March. The word from has a technical meaning dating back at least as far as Sir Edward Coke’s 1628 work known as Coke upon Littleton. Sir Edward says from is used in an exclusive sense so that a period from a date begins on the following day. In the case of tax it meant the year began on 26 March.
‘A similar approach was followed in government accounts. They ended on the usual quarter days of which one was Lady Day, namely, 25 March. Thus the account for the quarter from 25 March began on 26 March. Adding 11 days to 26 March produces a year which begins on 6 April.
‘Land tax was the more important of the two charged by the year and, remarkably, the year here remained essentially unchanged right up to the time the tax was abolished in 1963. It continued to be charged by reference to the year from 25 March.
‘Window tax was a permanent tax and the immediate impact of calendar reform on the window tax year is obscure. However, it is clear that when the tax was reformed in 1758 the year was explicitly changed so that it ran from 5 April. This meant the year began on 6 April.
‘The first Income Tax Act also ran from 5 April 1799 which again meant the year began on 6 April 1799. It was not until the Income Tax Act 1860 that the old from formula was finally abandoned in favour of a year commencing on 6 April.’
Alan’s research into this question ultimately led to him writing the definitive book on why the tax year begins on 6 April. It is available as a download from the usual resources. I read it recently and thoroughly enjoyed all 672 pages. There’s a lot here on calendar reform generally as well as extracts from many official papers and acts of parliament.
Andrew Hubbard, editor-in-chief.
Domicile
In our article ‘This is where I belong’ (Taxation, 30 March 2023) concerning the domicile of origin and the children of same-sex parents, we accidentally omitted to include a reference to Samuel Dewes’ previous article on the subject ‘Domicile difficulties’ (Taxation, 22 August 2018). This has been rectified on the online version of the article on taxation.co.uk.
Leaving the partnership
Our indefatigable correspondent Robert Maas has pointed out that both of the answers to the Readers’ forum question ‘Leaving the partnership’ (27 April 2023, page 21) do not take account of TCGA 1992, s 1A(3)(a) and s 1B.
These tax a non-resident on gains on an asset that is or was used in or for the purpose of a trade carried on in the UK. Partnership goodwill is clearly an asset used in the partnership trade.
Although the sections refer to a trade carried on through a branch or agency in the UK, the definition of this phrase (in s 1B(5)) includes an agency or management and it seems clear that a partnership trade is carried on through the agency or management of the partnership. Furthermore, where s 1A(3) applies to an asset s 1G(2) states that split year treatment cannot apply to such gains.
This would mean that the whole of tax gain is charged to UK tax and the statutory residence test is not relevant at all. It is a good reminder that the question that the client asks is not always the right one!
Taxation editorial team.
