Basis period reform – where are we?
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
31 July 2023
As tax practitioners help their clients to prepare for basis period reform, we look at the latest developments.
As the 2023/24 transitional year progresses, we continue to receive feedback from our members about basis period reform and how it will affect both them and their clients.
Despite the delay in the mandation of making tax digital for income tax self assessment (MTD ITSA), HMRC has made it clear that the implementation of basis period reform will continue as planned for the 2023/24 transitional year. Although we called for the ability to spread the transition profits for up to ten years, the legislation confirming that the maximum period where transitional profits can be spread over five years has now been finalised.
We are now focused on supporting our members with the implementation of basis period reform for their clients and will continue to have open and ongoing communication with HMRC regarding several practical aspects.
Provisional figures
As mentioned in our January 2023 article, HMRC has announced a change in the treatment of provisional figures in self assessment 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.
Guidance confirming this was originally expected before the start of the 2023/24 tax year, but we understand that HMRC will now be updating its guidance on this in the coming months. We will continue to monitor developments on this.
Overlap profit figures
As mentioned in the latest agent update, HMRC will be launching an online form to enable requests for overlap profit figures. This will allow tax practitioners to calculate the 2023/24 taxable profit or loss for their clients affected by basis period reform. By introducing this online form, HMRC will be able to direct requests to a dedicated team, meaning that tax practitioners should receive a prompter reply than general post.
HMRC has advised that overlap profits information can only be provided if these figures are recorded in HMRC systems. This will be reliant on information submitted as part of previous tax returns. Where the overlap profit figure has not been specifically noted on the client’s tax returns for previous years, HMRC will instead aim to provide information to enable the agent to calculate the overlap relief due.
We expect the online form to be launched at the end of August and that information on overlap profits should be provided by e-mail, provided that the agent can confirm that the client is in agreement to information being sent via e-mail. Full details on the online form will be updated on our website nearer the time.
Let us know your views
Please share your feedback on the implementation of basis period reform and how it will affect you and your clients.
More generally, we also welcome members’ input to inform our work on consultations or other tax-related matters – email us 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.