HMRC announces new service to help with basis period reform

Published: 5th May 2023

From 2024/25, all unincorporated businesses will have to report their profits using a tax year basis period. The current tax year is a transitional year, meaning there will be a need to make some adjustments when declaring your results. How will a newly-announced online form help?

If your unincorporated business has a year end other than 31 March or 5 April, you will be affected by basis period reform. When you declare your results for 2023/24, you will need to include transitional profits – those arising in the period from the accounting date in the year to 5 April 2024. For example, a business with a year end of 30 April will need to include all of the profits realised between 1 May 2022 to 5 April 2024 (23 months) into just one tax year. There are some provisions to help spread the impact of this over five years.

Perhaps more valuable will be the ability to deduct overlap relief. This relates to profits that are taxed twice during the early years of trading due to the way the old basis period rules worked. Any profits that overlapped in this way can be deducted on a change of accounting basis period and, as you’re being forced into exactly that due to the reform, will apply for the 2023/24 year. Many traders won’t have records of the overlap profits, so HMRC has announced that it is developing a new online form for requesting any information it holds regarding the figures. If the overlap relief carrying forward has never been recorded on the tax return, you’ll have to work it out from your profits instead. Don’t leave this until the last minute, as the relief will be lost if it is not claimed prior to 2024/25.