The government is proposing to reform the income tax basis period system for unincorporated businesses by moving from the current year basis to a tax year basis, with 2022/23 being the transitional year. For each tax year, the profits to be assessed will then be those arising during that year. It is proposed that any excess tax charge arising in the transitional year can be paid over five years. While this simplifies some aspects of the current regime (such as the opening and closing year rules, and overlap relief rules), it would introduce some new complications (including apportioning profits for businesses that do not adopt a 31 March year end, which is likely to be a particular problem for large international professional firms). Businesses will face practical and commercial issues, and many detailed matters remain to be addressed.
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The government is proposing to reform the income tax basis period system for unincorporated businesses by moving from the current year basis to a tax year basis, with 2022/23 being the transitional year. For each tax year, the profits to be assessed will then be those arising during that year. It is proposed that any excess tax charge arising in the transitional year can be paid over five years. While this simplifies some aspects of the current regime (such as the opening and closing year rules, and overlap relief rules), it would introduce some new complications (including apportioning profits for businesses that do not adopt a 31 March year end, which is likely to be a particular problem for large international professional firms). Businesses will face practical and commercial issues, and many detailed matters remain to be addressed.
If you are not a subscriber, subscribe now to read this content.
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