The First-tier Tribunal (FTT) has held that a taxpayer's new accounts did not meet the requirements of section 217, Income Tax (Trading and Other Income) Act 2005, for a change in accounting date, as the accounts did not exist when HMRC were notified of the change.
In Grint v HMRC  UKFTT 0537 (TC), the well-known Harry Potter film star, Rupert Grint (the Appellant), wished to bring forward the receipt of income to the tax year 2009/10, in order to avoid the 50% additional rate of income tax that applied from 2010/11. The Appellant therefore purported to change his accounting date, which required him to, among other things, produce accounts for a period of account ending on the new accounting date and not exceeding 18 months, and to give HMRC notice of that change by the date on which the tax return was filed (section 217, Income Tax (Trading and Other Income) Act 2005).
If the change in his accounting date had been effective, the Appellant would have saved around £1m in income tax.
Following an enquiry, HMRC amended the Appellant's tax returns for the tax years 2009/10 and 2010/11. The Appellant appealed against these amendments.
The FTT held that to change an accounting date, the accounts effecting the change and satisfying the statutory requirements, must exist when the tax return was filed.
In the view of the FTT, it is implicit in the legislation that it only permits notification of actual changes in accounting date and not prospective ones and as the change is effected by drawing up accounts to the new accounting date, there can be no change in the accounting date when the accounts to the new accounting date have not been drawn up at the time HMRC is notified.
The FTT concluded that the relevant accounts in the Appellant's case were for a period exceeding 18 months and could not, therefore, operate to change his accounting date. Accordingly, the Appellant's appeal was dismissed.
The decision, while fact-dependent, contains some interesting commentary on the meaning of "accounts". The FTT said that multiple accounts could, as in this case, exist, however, where this did occur, the relevant accounts were those that the taxpayer relied upon for general commercial purposes.Taxpayers will no doubtwish to bear that in mind when changing accounting date.
A copy of the decision can be found here.