Accounts - basis period reform
Posted on 22nd August 2023 at 13:28
Basis period reform - HMRC to provide online overlap relief form.
HMRC has followed up its recent guidance regarding the abolition of basis periods with a brand-new online form for requesting overlap relief records.
If you’re a sole trader or partner and your business accounting year end date doesn’t fall between 31 March to 5 April (inclusive), you will be affected by basis period reform.
From 2024/25 all unincorporated businesses must report and will be taxed on their profits arising in each tax year instead of those shown by their accounts ending in the tax year. The last year for using the old basis is 2022/23 and so 2023/24 is the transition year.
If a business is affected by the change it’s likely to have accrued overlap relief (which prevents the double taxation of profits), which must be used in the transition year or permanently lost. When reporting profits for 2023/24, you must include the total of those for the accounting period(s) ending in that year plus a proportion of the profits for the first accounting period ending in 2024/25. For example, a business with a year end of 30 June must report the profits for the accounting period between 1 July 2022 to 30 June 2023 plus 9/12ths of the profit shown by its accounts for the year ended 30 June 2024. From that figure any overlap relief must be deducted.
As overlap relief may have accrued as far back as 1996, HMRC recognises that business owners may have mislaid the details. To help, it’s created an online form to request overlap relief details, which will be available from 29 August.
Don’t wait until the last minute to request the details as there will probably be a backlog of requests as the tax return filing deadline approaches.
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Tagged as: Bookkeeping, Self employment
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