One of the things with which many people struggle when thinking about tax, is why on Earth the tax year begins on 6th April of each year. The date just seems so very arbitrary.
The date of the first day of the tax year is not in fact so random but to understand why it is so, requires a look back in time. A long, long way back in time.
In the medieval era the calendar was marked by four key days in the religious calendar:
1. Lady Day, March 25th, commemorated the day on which the archangel Gabriel announced to the Virgin Mary that she would bear a son, Jesus Christ;
2. Midsummer, June 24th;
3. Michaelmas, September 29th, and
4. Christmas Day, December 25th.
By custom, accounts had to be settled by each of these “quarter days” as they became known and so each marked the end of a natural accounting period.
Lady Day was the first such “quarter day” and over time (for reasons that are now obscured by time) it came to be regarded as the beginning of the financial year.
Throughout this period, the “Julian calendar” was in use in England. That calendar had been established by none other than Julius Caesar himself. The Julian calendar had a leap year every four years to account for the fact that it takes a little longer than 365 days for the Earth to orbit the Sun.
Unfortunately, the Earth takes a little less than 365.25 days to orbit its star. In fact, it takes more like 365 days, 5 hours, 48 minutes and 30 seconds… And so it came to pass that in October 1582 Pope Gregory XIII introduced the “Gregorian calendar” to address the issue. In a document entitled the Inter Gravissimas, a papal bull, it was decreed that every 400 years three leap days would be omitted.
England has always been a little old-fashioned and change can come slowly. It was not until 1752 that England decided to adopt the Gregorian calendar. By then, England was 11 days discrepant with the rest of Europe and so it was decreed that September 2nd would be immediately followed by September 14th for that year only.
The Treasury was concerned that the shortened year would result in lower revenues and so decreed that the beginning of the tax year would change to April 5th and there it might have remained but for yet another development. In the history of the tax year, this was to be the first arbitrary change.
In 1800 under the Julian calendar it would have been a leap year but it was not in the Gregorian calendar. The Treasury, in a move that HMRC would be proud of today, decided to treat the year as a leap year anyway and thereby generate an extra day’s worth of revenue. So the beginning of the fiscal year was moved to April 6th. There it has remained since.
How is it determined when a leap year will be skipped?
The Gregorian calendar established that a leap year would occur in any year that was divisible by 4 but not if it was also divisible by 100 unless it was also divisible by 400. Make sense? Take a closer look and you will see that under this system, 3 leap days are skipped every 400 years.
Under the formula the year 1900 was not a leap year but the year 2000 was (and thank goodness, the millennial celebrations just would not have been the same). The year 2100 too will not be a leap year.
In 1900 the Treasury missed out on the opportunity to adopt a precedent and squeeze out an extra day’s worth of revenue. Will HMRC make the same mistake in 2100?