The Law Society has responded to HMRC’s consultation on potential easements for firms affected by basis period reform. The reforms will result in more taxpayers, including a significant proportion of partners in law firms, needing to submit provisional figures in their tax returns which will subsequently need to be corrected.
HMRC is consulting on potential easements which would include allowing more time to file amended tax returns, extending tax return deadlines and/or allowing adjustments to a previous return in the following tax return.
The Law society highlights a number of points:
all taxpayers affected by basis period reform should have the option to choose between amending provisional figures in the return or making adjustments in the following return (each to sufficiently generous deadlines);
for partnerships and LLPs, a deferred introduction of basis period reform would allow for a period of reflection, giving time to learn from the roll-out to sole traders before applying the reforms to more complex structures;
potential partnership-level easements should also be developed and implemented, with the Law Society supporting the idea of a partnership-level return that automatically feeds into figures in tax returns (noting that this would require sufficient resourcing from HMRC); and
the society supports a safe harbour easement (where adjustments would not be required so long as the difference between estimated and actual figures is within a given threshold), but limited to liabilities to pay interest on underpaid tax – suggesting that taxpayers should be ‘safe from interest’ if they pay tax based on the higher of a percentage (e.g. 105%) for the previous tax year and an estimate for the current tax year.
The Law Society has responded to HMRC’s consultation on potential easements for firms affected by basis period reform. The reforms will result in more taxpayers, including a significant proportion of partners in law firms, needing to submit provisional figures in their tax returns which will subsequently need to be corrected.
HMRC is consulting on potential easements which would include allowing more time to file amended tax returns, extending tax return deadlines and/or allowing adjustments to a previous return in the following tax return.
The Law society highlights a number of points:
all taxpayers affected by basis period reform should have the option to choose between amending provisional figures in the return or making adjustments in the following return (each to sufficiently generous deadlines);
for partnerships and LLPs, a deferred introduction of basis period reform would allow for a period of reflection, giving time to learn from the roll-out to sole traders before applying the reforms to more complex structures;
potential partnership-level easements should also be developed and implemented, with the Law Society supporting the idea of a partnership-level return that automatically feeds into figures in tax returns (noting that this would require sufficient resourcing from HMRC); and
the society supports a safe harbour easement (where adjustments would not be required so long as the difference between estimated and actual figures is within a given threshold), but limited to liabilities to pay interest on underpaid tax – suggesting that taxpayers should be ‘safe from interest’ if they pay tax based on the higher of a percentage (e.g. 105%) for the previous tax year and an estimate for the current tax year.
