- Taxable trading profits (for income tax purposes) from April 2024 will be based on amounts apportioned to the tax year (“tax year basis”), rather than the accounting period ending in the tax year (“current year basis”).
- The change was intended to make taxation of trading profits simpler where the accounting period does not align to the tax year, but it is expected to be more difficult in practice for complex and/or international partnerships due to the need to estimate profit figures and/or foreign taxes for the second accounting period.
- Timing: the changes apply from April 2024, with transitional rules in place from April 2023. HMRC published a technical paper on 20 April 2022 to support discussions with advisers on administrative and policy easements. HMRC confirmed on 2 December 2022 that the only easement will be allowing amendments to the estimated figures to be made by the following 31 January rather than “without delay”. This is not expected to provide any practical benefit.
Resources (click to open)
- Basis period reform | TaxScape | Deloitte (June 2023)
- Basis period reform: summary of responses - GOV.UK (www.gov.uk) (November 2021)
- HMRC consultation on basis periods (closed in August 2021)
