Basis period and MTD reform

The CIOT, ATT and other professional bodies have urged the UK government to reconsider the timetable for basis period reform alongside other changes in the move towards a digital tax system.

The professional bodies consider that digital tax reforms are being implemented too quickly, with the changes to basis periods likely to place pressure on businesses and their advisers as well as on HMRC.

In a letter to the government, the professional bodies highlight a number of key concerns for businesses and advisers, including:

–        basis period reform will come on top of the changes required by MTD for income tax and more small businesses being brought within the scope of MTD for VAT;

–        other recent and forthcoming changes will add further complications – for example, the changing penalty regimes and the CGT 30-day online reporting and payment system for disposals of UK residential land; and

–        basis period reform will add complexity for some businesses, and will result in earlier payment of tax by many – potentially damaging for businesses recovering from the impact of Covid-19.

The bodies note that the scale and complexity of change will affect many small and unrepresented businesses, many of which will not understand the technical changes and will need extra help, and urge the UK government to undertake an extensive public education programme before implementation (similar to that before the introduction of self-assessment in the 1990s).

The letter includes a schedule of key changes along with their estimated impact.

The professional bodies encourage the UK government to urgently reconsider the timetable for the basis period and MTD for income tax proposals.