All change for income tax basis periods – ICAS welcomes the Chancellor’s announcement on reform
ICAS comments on basis period reform.
ICAS welcomes the Chancellor’s announcement that income tax basis period reform will go ahead – but much work needs to be done ahead of the introduction of Making Tax Digital for income tax.
Susan Cattell, ICAS Head of Tax Technical Policy, said:
“We believe that adopting the tax year basis is a sensible approach in principle and removes a number of complications which have been around for a long time. For most new businesses this will be a useful simplification.”
However, there are some practical challenges to be overcome in the relatively short time available before Making Tax Digital for income tax commences.
Philip McNeil, ICAS Head of Taxation (Tax Practice and Owner Managed Business Taxes), commented:
“Businesses which don’t have 31 March or 5 April year ends will need to consider how they are affected by basis period reform – particularly the transitional rules. At the same time, they will also have to prepare for Making Tax Digital. Now that there is some certainty about timing and basis periods, we hope that software providers will release a range of MTD products so that businesses can find something which works for them”.
ICAS expects that many businesses will choose to change their accounting dates to 31 March – but there will be longer term issues for businesses who can’t do this for commercial reasons.
Charlotte Barbour, ICAS Director of Tax, observed:
“The consequences of basis period reform for businesses which can’t adopt a 31 March accounting date could be onerous because of the need to apportion profits and potentially to file initial estimated returns. This could affect Scottish businesses in the farming, tourism and hospitality sectors which often use 30 September or 31 December accounting dates. We hope the legislation in the Finance Bill will include some mitigations to help these businesses.”
Find out more about ICAS Tax policy positions