13 Sept 2023
As Rebecca Benneyworth explained in her 20:20 Innovation webinar in March 2023, reforms to the Basis Period Rules will mean that all unincorporated businesses will be taxed on profits for the fiscal year from 2024/25 onwards, regardless of their accounting year end. 2023/24 is known as the ‘transitional year’, in which traders who have previously declared their profits for an accounting period ending in a tax year will also have to declare the extra profits incurred up to 31 March or 5 April 2024. Those with any overlap relief brought forward will be able to deduct it from their 2023/24 results.
The reforms will mean that unincorporated businesses will need to use any brought-forward overlap relief in the 2023/24 tax year, or earlier if they choose to change their accounting date sooner. It will not be possible to use overlap relief in later tax years. Businesses that may have overlap relief are those that have, now or in the past, an accounting year end that does not align with the tax year end. So, those traders who have always had a 31 March/5 April year-end do not need to worry about overlap relief.
If an unincorporated business (or their agent) does not have a record of any overlap relief that may be due to them, it is possible to obtain this information from HMRC, if they have it. It has previously been possible to request this information by calling or writing to HMRC, but a new designated service can now be used instead.
The service and accompanying guidance, which went live on Monday 11 September after a 2-week delay, will allow unincorporated traders and their agents to request details of their overlap relief from HMRC. It cannot be used to obtain overlap figures for trusts, estates, or non-resident companies that have trading income; these entities are advised to contact HMRC to find out how to get their overlap figures.
The service is accessed by signing in using the Government Gateway user ID and password for self-assessment. Agents can access the service via their Agent Services Account and must submit a separate request for each client.
The following information is required for each request:
You will be asked for contact details and whether you would like to receive a response by letter or email.
After submitting the information, HMRC will issue a confirmation of receipt and then make contact with the requested overlap profit information, if HMRC have access to it themselves. They pledge to provide this information within 3 weeks of the original request, albeit HMRC acknowledge that this may take longer in complex cases.
It will be key for practitioners to identify clients with missing overlap profit information sooner rather than later; we certainly don’t want to be submitting these requests in December 2024 or January 2025!
Rebecca Benneyworth will be updating us all again on Basis Periods as part of our 2024 CPD webinar programme and 20:20 Innovation platinum members continue to include the useful Basis Periods tax tools including:
We are also excited to be working on a new flowchart infographic to help with decision-making and profit calculation when year-ends and basis periods are concerned. This will be an additional platinum member resource and you can register your interest in this for an early copy by emailing firstname.lastname@example.org.
We look forward to hearing how our members get on with the new HMRC service, whether in our Practice Forums or otherwise.