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The taxpayer failed to meet all the criteria for a valid change of accounting date because the accounts of the business were for a 20-month period, and therefore the ‘18-month test’ condition was not satisfied.
The appellant had an annual accounting date of 31 July. In 2009/10, he decided on advice to change his accounting date to 5 April, and so bring into account in that tax year income earned in the period 1 August 2008 to 5 April 2010 (i.e. a 20 month, rather than a ‘12 month’, basis period in 2009/10). This would have been to his advantage because a new higher rate of tax was introduced for the following tax year.
However, HM Revenue and Customs (HMRC) did not accept that the appellant had effected a change in his accounting date. The dispute concerned whether or not the conditions (in ITTOIA 2005, s 217) for a valid change of accounting date (in s 216) were met, and in particular, the ‘18-month test’ (in s 217(3)). For the change in accounting date to be effective, the appellant had to show that his period of account to 5 April 2010 was not longer than 18 months.
The parties did not agree on the meaning of ‘accounts’ and on what was the period to which the taxpayer drew up accounts. Four sets of ‘accounts’ were referred to in the First-tier Tribunal (FTT) hearing. The FTT ([2016] UKFTT 537 (TC)) held that ‘long accounts’ (prepared by the appellant’s advisers covering a 20-month period from 1 August 2008 to 5 April 2010) were the accounts that mattered for the purposes of s 217. The appellant failed the s 217 test because he did not have accounts with an accounting period no longer than 18 months to the accounting date of 5 April 2010 at the time he notified the change of accounting date. The appellant appealed.
The Upper Tribunal (UT) agreed with the FTT that the ‘long accounts’ better fitted the description in ITA 2007, s 989 (which defines ‘period of account’) of being ‘the accounts of the business’. The ‘period of account’ was the period covered by the ‘long accounts’. The UT held that there was no error of law in the FTT’s conclusion that the ‘long accounts’ were the ‘accounts which matter’ for the purposes of ITTOIA 2005, s 217.
The UT also considered other grounds of appeal, and (among other things) agreed with the FTT’s conclusion that two sets of supplementary self-employment pages attached to the appellant’s tax return did not constitute ‘accounts’. The appellant’s appeal was dismissed.
Grint v Revenue and Customs [2019] UKUT 0028 (TCC)
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