Basis Period Reform - easements for provisional figures and update on overlap relief figure
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
27 January 2023
Chris Campbell provides an update on recent HMRC announcements re basis period reform
What has changed on basis period reform?
After the announcement before Christmas of the delay in mandatory MTD ITSA, many businesses and tax practitioners hoped this would be accompanied by a delay in basis period reform. The MTD ITSA delay was about giving businesses (and HMRC itself) the time to fully prepare so that their systems are ready for when they are required to submit MTD compliant returns to HMRC.
On basis period reform, it is very much full steam ahead and this will carry on as originally planned. HMRC has provided an update on some key areas, as part of assisting with basis period reform implementation.
Provisional figures
After consulting with the professional bodies and other stakeholders, HMRC has announced a change in the treatment of provisional figures in tax returns. The time limit for amending provisional figures will be changed to the normal time limits for making amendments to self assessment tax returns. This will mean that businesses can amend provisional figures when they are preparing the tax return for the following period, something that will be appreciated by both businesses and tax practitioners alike.
HMRC will be updating its guidance before the start of the 2023/24 tax year, so that this is in place before the transition year for basis period reform.
Overlap relief
For non 31 March/5 April accounting year ends, the availability of overlap relief will impact on the taxable profit/loss for the transitional year. We have listened to feedback from our Members and have been in dialogue with HMRC, to relay concerns on the availability of overlap relief figures from HMRC.
For businesses looking to change their accounting year in 2021/22 tax year, HMRC is willing to provide overlap profit figures from HMRC systems (or historic profit figures to enable the overlap profit figure to be calculated). Taxpayers should call the HMRC Self Assessment Helpline and agents should call the Agent Dedicated Line if they need this information to complete a 2021/22 tax return. This will have caused challenges in the run up to the 31 January 2023 filing deadline.
We continue to have discussions with HMRC for providing overall relief figures for unincorporated businesses changing accounting year ends in the 2022/23 and 2023/24 tax years. Please watch this space for more details.
Communications
HMRC is working on tailored communications to support unrepresented taxpayers to help them complete their tax returns for the transition tax year. New articles will be published on gov.uk in due course.
Let us know your views
We welcome Members’ input to inform our work on consultations or other tax-related matters – email tax@icas.com to share your insights and feedback. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by Members.