ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

HMRC: Responsible for the 2016 leap year?

London skyline
  • LinkedIn (opens new window)
  • Twitter (opens new window)
Philip McNeil By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)

20 April 2018

Main Points:

  • A case on the acceptable accounting period for corporation tax was brought before a judge.
  • The question centred on how did HMRC’s filing system affect accounts?
  • Going forward, will digital systems need to be changed for each leap year?

One of the oddest questions recently addressed by a tax tribunal was whether HMRC was responsible for 2016 being a leap year. While this might seem to be moving into the realms of fantasy, Philip McNeill shows that it has a very practical application to corporation tax penalties in a digital world.

Late filing penalties, accounting periods and liability for Corporation tax

The core issue in Bells Financial Services Ltd (Bells Financial Services Ltd TC06326 [2018] UKFTT 0048 (TC)) was the validity of an accounting period which ran from 1 March 2015 to 28 February 2016, when February 2016 had 29 days.

Was this an acceptable accounting period for corporation tax? And was HMRC correct in saying that the company would need to file a return for a single day, 29 February 2016, if its accounting period ended on the 28 February, and face penalties if it didn’t?

Furthermore, would HMRC’s online filing system be at fault, and potentially any late filing penalties invalid, if its system was programmed only to accept accounts to 29 February in a leap year?

What is a company accounting period?

Section 9 Corporation Tax Act 2010 (CTA 2010) says that an accounting period starts immediately after the end of the previous accounting period, and section 10 states that it finishes 12 months later, or on the accounting date of the company (if earlier).

Filing a corporation tax return

The rules governing the filing corporation tax returns are in schedule 18 of Finance Act 1998 (FA 1998). These state that (paragraph 5(2)) ‘if an accounting period of the company ended during (or at the end of) the specified period, a return is required for that accounting period.’

Where there is more than one accounting period, a separate company tax return is required for each of them.

The leap year mismatch

HMRC issued to the appellant company a notice to file for the period 1 March 2015 to 29 February 2016, but the company had prepared accounts for the period 1 March 2015 to 28 February 2016. Did they need to file a return for a single day? What if HMRC’s systems prevented them filing to 28 February?

Digital scramble

The tribunal confirmed that the law requires corporation tax filing to match the accounting period. If the accounting period ended on 28 February 2016, then those are the figures required. There is no additional one-day accounting period to round up the month.

On the question of HMRC’s systems being programmed only to accept submissions to the month end, Judge Thomas’ comments make very interesting reading:

‘If it is true that HMRC’s software would not accept a filing for the correct accounting period, then I have no hesitation in holding that the appellant had a reasonable excuse for not filing on time. Such an excuse would last until HMRC reprogrammed its system to accept a valid return.’

So, programming which accidentally misinterprets the tax law provides an ongoing let out clause.

People against machines

When added to his comments in Khan Properties (Khan Properties Ltd TC06225 [2017] UKFTT 830 (TC)) that ‘a determination [for penalties] under s 100 [TMA 1970] must be made by an officer of HMRC, that is a human being’ it becomes clear that digital taxation has its limits. A computerised, automated response may be insufficient to comply with the law.

The company late filing penalties were cancelled…

And the leap year question

And who was responsible for there being 29 days in February 2016? In the words of Judge Thomas:

‘I do accept however that HMRC cannot take responsibility for 2016 being a leap year. The responsibility for that lies with the emperor Augustus Caesar who in AD4 had the Julian calendar recalibrated to make leap years every four years starting with AD8.’


This article originally appeared in CA Tax - April 2018.

Header

VAT threshold under the microscope

By Donald Drysdale for ICAS

23 March 2018

Football_Goal

Spurs score twice against HMRC on terminations

By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)

21 February 2018

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: