HMRC now intends to launch its online form for requesting details of overlap profits for the purpose of basis period reform on 11 September 2023, rather than 29 August as previously announced. HMRC has updated its various guidance pages accordingly, including the recently published Agent Update Issue 111.
The CIOT reports that HMRC’s testing of the new process revealed a number of refinements, which will now be made before the service is formally launched.
Published on 31 July, HMRC's new guidance Changes to reporting income from self employment and partnerships explains the basis period reform changes for the 2023/24 transitional tax year, outlining the basic principle that taxpayers will need to report profits from the day after the end of their accounting year that fell in 2022/23 up to 5 April 2024.
For example, for 2023/24, a business drawing up accounts to 31 December 2022 would need to report profits from 1 January 2023 to 5 April 2024. Where those profits cover more than 12 months, the excess is 'transitional profit' and can be reduced by overlap relief and spread across future tax years up to 2027/28.
The tax year basis comes into force fully for 2024/25. From 6 April 2024, a business whose accounting year does not align with the tax year will need to report profits from the relevant parts of its accounts for two accounting years. For example, for 2024/25, a business with a 31 December 2024 year end will need to report profits from 6 April 2024 to 31 December 2024 and also from 1 January 2025 to 5 April 2025, apportioning profits according to the number of days in each accounting period that fall within the tax year (although HMRC says that other 'reasonable' apportionment methods can be used).
Apportionment has been highlighted as a potential difficulty for the tax year basis. Businesses may not be in a position to finalise their accounts for the second portion of profits that fall in the tax year until after the tax return deadline. In such cases, provisional figures will need to be used, with the final figures entered as an amendment to the return. The Low Incomes Tax Reform Group has produced a practical guidance note on basis period reform, setting out a number of examples of how the regime will work from 2024, and the implications of the transitional tax year for self-employed individuals and partnerships.
HMRC now intends to launch its online form for requesting details of overlap profits for the purpose of basis period reform on 11 September 2023, rather than 29 August as previously announced. HMRC has updated its various guidance pages accordingly, including the recently published Agent Update Issue 111.
The CIOT reports that HMRC’s testing of the new process revealed a number of refinements, which will now be made before the service is formally launched.
Published on 31 July, HMRC's new guidance Changes to reporting income from self employment and partnerships explains the basis period reform changes for the 2023/24 transitional tax year, outlining the basic principle that taxpayers will need to report profits from the day after the end of their accounting year that fell in 2022/23 up to 5 April 2024.
For example, for 2023/24, a business drawing up accounts to 31 December 2022 would need to report profits from 1 January 2023 to 5 April 2024. Where those profits cover more than 12 months, the excess is 'transitional profit' and can be reduced by overlap relief and spread across future tax years up to 2027/28.
The tax year basis comes into force fully for 2024/25. From 6 April 2024, a business whose accounting year does not align with the tax year will need to report profits from the relevant parts of its accounts for two accounting years. For example, for 2024/25, a business with a 31 December 2024 year end will need to report profits from 6 April 2024 to 31 December 2024 and also from 1 January 2025 to 5 April 2025, apportioning profits according to the number of days in each accounting period that fall within the tax year (although HMRC says that other 'reasonable' apportionment methods can be used).
Apportionment has been highlighted as a potential difficulty for the tax year basis. Businesses may not be in a position to finalise their accounts for the second portion of profits that fall in the tax year until after the tax return deadline. In such cases, provisional figures will need to be used, with the final figures entered as an amendment to the return. The Low Incomes Tax Reform Group has produced a practical guidance note on basis period reform, setting out a number of examples of how the regime will work from 2024, and the implications of the transitional tax year for self-employed individuals and partnerships.
