Hundreds of partners at firms that do not use 31 March as their financial year-end could face hefty tax bills, an accountancy firm has warned.

Lubbock Fine says 375 of the UK’s 500 biggest firms use a date other than 31 March as their accounting year end. However, from April next year, partners will be required by HM Revenue & Customs to calculate their income tax bills with a 31 March or 5 April year end.

The firm says partners with a different year-end will have to estimate their income tax bills as their firm’s accounts will not yet be complete, resulting in many overpaying or underpaying tax. People who underpay tax are charged interest when they make up those underpayments later. Underpaid tax currently incurs a 6.75% interest rate and late payment penalty.

A further breakdown of the top 500 firms shows that 125 use 31 March as the financial year-end for accounting purposes, 172 use 30 April and 104 firms use 31 December. Year-ends for the remaining firms fall in other months.

Changing the accounting year-end could incur costs but Lubbock Fine partner Mark Turner said the sooner a firm begins the transition, the easier it will be for everyone.

‘These new HMRC rules are going to result in unexpected and unwelcome costs for a lot of partners at law firms. This is a major change that has flown under the radar for many firms. There will be partners who won’t realise the problem until it has already cost them money,’ Turner said.

 

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