HMRC update on help for businesses that cannot change their accounting date to coincide with the end of the tax year and on establishing entitlement to overlap relief.
From the tax year 2024/25 onwards, owners of trading businesses will report the taxable profits of those businesses on a tax year basis, rather than reporting the taxable results for the accounting period that ends in the tax year.
Businesses that continue to use an accounting date other than the end of the tax year may find it difficult to establish their results by the deadline for submitting their tax return. For example, currently a business with a year-end of 31 December would use the results of the year ended 31 December 2021 as the basis period for 2021/22. The tax return for 2021/22 is due by 31 January 2023 allowing 13 months for the figures to be finalised.
The new rules will require the profits for a particular tax year to be based on a proportion of the profits for the accounting periods that fall, even partially, within the tax year. In the example of a business with a 31 December accounting year end, the profits for the 2024/25 tax year would be based on nine months from the year ended 31 December 2024 and three months from the year ended 31 December 2025. The results for the latter accounting period may not be known by the 2024/25 filing deadline of 31 January 2026. In such cases, business owners would need to estimate those results and use that as the basis for their tax return submissions.
Earlier this year, HMRC sought views on potential options for dealing with provisional figures. After considering the feedback provided by stakeholders, as well as the legislative complexity and delivery implications of the options available, the government has decided to take forwards the option that would allow businesses to amend provisional figures to the normal time limits for making amendments. In the illustration above for the 2024/25 tax year, this would be before 31 January 2027. This will effectively allow businesses and agents to amend provisional figures at the same time as filing the business’s following year’s tax return.
HMRC’s guidance on provisional figures currently asks businesses to make amendments to provide final figures ‘without delay’. This condition will be relaxed before the start of the basis period transition year in 2023/24.
For those businesses looking to change their accounting date to coincide with the tax year, the government is continuing to explore methods of providing overlap relief figures to taxpayers and their agents. This might be by informing businesses and agents of overlap relief figures that HMRC holds or providing a method for businesses and agents to request these figures from HMRC.
For businesses looking to change their accounting date in the 2021/22 tax year, HMRC can provide details of overlap relief figures or historic profit figures on request if these figures are recorded in HMRC systems. Taxpayers that need this information to complete a 2021/22 tax return should make the request via the HMRC Self Assessment Helpline. Agents should call the Agent Dedicated Line.
In the coming months, HMRC plans to provide certainty on overlap relief support for businesses looking to change accounting dates in 2022/23 or use overlap relief in the 2023/24 transition year. HMRC requests that businesses in this situation – and their agents – should wait until HMRC is able to provide further information on the support available.
Read more on basis period reform.
Businesses that continue to use an accounting date other than the end of the tax year may find it difficult to establish their results by the deadline for submitting their tax return. For example, currently a business with a year-end of 31 December would use the results of the year ended 31 December 2021 as the basis period for 2021/22. The tax return for 2021/22 is due by 31 January 2023 allowing 13 months for the figures to be finalised.
The new rules will require the profits for a particular tax year to be based on a proportion of the profits for the accounting periods that fall, even partially, within the tax year. In the example of a business with a 31 December accounting year end, the profits for the 2024/25 tax year would be based on nine months from the year ended 31 December 2024 and three months from the year ended 31 December 2025. The results for the latter accounting period may not be known by the 2024/25 filing deadline of 31 January 2026. In such cases, business owners would need to estimate those results and use that as the basis for their tax return submissions.
Earlier this year, HMRC sought views on potential options for dealing with provisional figures. After considering the feedback provided by stakeholders, as well as the legislative complexity and delivery implications of the options available, the government has decided to take forwards the option that would allow businesses to amend provisional figures to the normal time limits for making amendments. In the illustration above for the 2024/25 tax year, this would be before 31 January 2027. This will effectively allow businesses and agents to amend provisional figures at the same time as filing the business’s following year’s tax return.
HMRC’s guidance on provisional figures currently asks businesses to make amendments to provide final figures ‘without delay’. This condition will be relaxed before the start of the basis period transition year in 2023/24.
For those businesses looking to change their accounting date to coincide with the tax year, the government is continuing to explore methods of providing overlap relief figures to taxpayers and their agents. This might be by informing businesses and agents of overlap relief figures that HMRC holds or providing a method for businesses and agents to request these figures from HMRC.
For businesses looking to change their accounting date in the 2021/22 tax year, HMRC can provide details of overlap relief figures or historic profit figures on request if these figures are recorded in HMRC systems. Taxpayers that need this information to complete a 2021/22 tax return should make the request via the HMRC Self Assessment Helpline. Agents should call the Agent Dedicated Line.
In the coming months, HMRC plans to provide certainty on overlap relief support for businesses looking to change accounting dates in 2022/23 or use overlap relief in the 2023/24 transition year. HMRC requests that businesses in this situation – and their agents – should wait until HMRC is able to provide further information on the support available.
Read more on basis period reform.
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