Published on: 25 August 2021
HM Revenue & Customs (HMRC) has published a consultation on possible reforms to the way in which income tax is reported. The proposals change the basis period rules from a ‘current year basis’ to a ‘tax year basis’.
This transition would take place from 2022 to 2023 and would impact sole traders and the self-employed. The proposals would actually come into effect from 2023 to 2024.
If taken forward and implemented, the proposals would mean that a businesses’ profit or loss for a given tax year would be the profit or loss that occurred in that actual tax year, regardless of the accounting date.
The purpose of the reforms is to simplify the income tax rules for allocating trading profit to tax years, making the rules fairer for small businesses and easier to understand. The UK Government intends to deliver these reforms to simplify the system before making income tax digital.
The consultation sets out which businesses are most likely to be affected including the groups most likely to benefit and those that might be disadvantaged. British Marine understands that the changes are likely to affect seasonal businesses and would encourage its members to familiarise themselves with the proposals.
The deadline for responding to the consultation is 11.45pm on 31 August 2021.