Transition Profits - 2023-24

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We've just had our software updated for the 23/24 tax year (one of the major ones). Looking at transitional profits as sole trader. 

We've found that it completely ignores the transitional profit rules / the profit spreading rules if the business has chosen to change their year end to 5 April 24 or 31 March 24. In that instance, it doesn't calculate any profit spreading. Just deducts overlap in the normal way that would apply to a year end change. 

It works out the transitional profits and spreading perfectly if they keep their year end of, say 30 Sep 2024, or 30 June 2024. But I imagine most businesses will be switching to 5 April 24 or 31 March 24.

We think its a bug. But wanted to ask if anyone else has experienced the same with their software? 

Its my understanding of the rules that a business who had previously prepared their accounts to say 30 June every year would benefit from the spreading provisions whether they continue to prepare accounts to 30 June 2024, or whether they moved their year end date to 31 March 2024.

Our software thinks otherwise. 

Replies (95)

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Replying to rmillaree:
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By Matrix
08th Apr 2024 20:52

You just use the profit for the standard part. Neither the notes nor HS222 say box 64 is only the standard part, maybe someone else has found it elsewhere.

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Replying to rmillaree:
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By Ardeninian
23rd Apr 2024 12:03

The step you are missing is box 68 should be minus 12,526. This will adjust the taxable profit of the accounting period of 50,000 from box 64 down to the standard profit of the basis period 37,474, because transition profit should not be included in box 73 or box 76.

Also box 67 should be 05/04/2024 because that is the end of the basis period.

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Replying to Ardeninian:
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By rmillaree
23rd Apr 2024 13:10

"The step you are missing is box 68 should be minus 12,526."

thats not how it should be done per the specific guidance that goes with box 68 if you take that guidance literally- it says specifically says "Do not include any transition profit or loss in this box". the 12526 is the transition period profit !!!

per tax return notes
Box 68 If your basis period is not the same
as your accounting periodYou may have to add together the amounts of youraccounting periods or apportion the total to work
out your profit or loss for your basis period. Put any adjustments to your profit (box 64) or loss(box 65) in box 68. Do not include any transition profit or loss in this box.

note practicably speaking both using box 68 although it says dont use it and adjusting down box 64 "behind the scenes" (croner recommend doing that) both seem to get the same desired result here - its just that no one has posted concrete confirmation that i have seen as to which step is right and wording of both 64 and 68 at an initial glance seem to suggest neither is approrpiate - this might explain why iris and btc are being sketchy with regard to what they say - if the answer is there its probably deep in the worked caluclation sheet !

It would have been complete non issue had step by step guide linked to tax return box by box completion been provided - this should be a complete non issue - its the easy part of the adjustment needed!

Your suggestion that box 68 adjust is correct might be correct - its just a shame that the notes seem to suggest otherwise !!

ref 67 - agreed that is either 31/03 or 05/04

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Replying to rmillaree:
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By Ardeninian
23rd Apr 2024 13:43

Exactly: the 12,526 is the transition profit, so you need to put minus 12,526 in box 68 to remove it. If you didn't have any transition profit in box 64 you wouldn't have an entry at box 68.

Box 67 is definitely 5/4 due to para 65(1) Sch 1 FA22:

65(1) Chapter 15 of Part 2 of ITTOIA 2005 (basis periods) applies as if—
(a) the basis period for the tax year 2023-24 were, instead of the period determined in accordance with that Chapter, the period—
(i) beginning immediately after the end of the basis period for the tax year 2022-23 (determined in accordance with that Chapter as it applies in relation to that tax year), and
(ii) ending with 5 April 2024;
(b) section 220 of that Act were disregarded.

It is only a date earlier than 5/4/24 if the trade is ceasing.

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Replying to Ardeninian:
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By rmillaree
23rd Apr 2024 14:17

"Exactly: the 12,526 is the transition profit, so you need to put minus 12,526 in box 68 to remove it. If you didn't have any transition profit in box 64 you wouldn't have an entry at box 68."

just to be clear here the notes to box 68 say the following

"Do not include any transition profit or loss in this box."

are you saying that due to the adjustment being a minus that that overides the fact it is saying "Do not include any transition profit or loss in this box." ?

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Replying to rmillaree:
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By Ardeninian
23rd Apr 2024 15:19

rmillaree wrote:

"Exactly: the 12,526 is the transition profit, so you need to put minus 12,526 in box 68 to remove it. If you didn't have any transition profit in box 64 you wouldn't have an entry at box 68."

just to be clear here the notes to box 68 say the following

"Do not include any transition profit or loss in this box."

are you saying that due to the adjustment being a minus that that overides the fact it is saying "Do not include any transition profit or loss in this box." ?


Yes. In simple terms, whatever is in box 64 (or box 65), together with any entry in box 68, should total the standard profit. Your box 64 figure, because it covers the whole 16-month accounting period and therefore the standard and transition profit, is too high, so you need a negative adjustment in box 68 to bring it down to the standard profit.
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Replying to Ardeninian:
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By rmillaree
23rd Apr 2024 14:36

"Box 67 is definitely 5/4"

are you sure ?

My reading of BIM81260 seems to indicate the basi period ends 31st March if we are doing a set of acounts for period 01/12/2022-31/3/2024.

in the text below it sems to say end date ref working out basis period is accounting date end if that is 31st March? - could i be misreading that text ?

BIM81260

The transition part is the period that begins immediately after the standard part and ends on either:

5 April 2024 or
The late accounting date if this falls on 31 March to 4 April inclusive (and there is no election to disapply the late accounting date rules).

If the accounts in the 2023-24 tax year are drawn up to an accounting date of 31 March to 4 April 2024 inclusive, the late accounting date rules (see BIM81210) will apply for the transition part.

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Replying to rmillaree:
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By Ardeninian
23rd Apr 2024 15:22

rmillaree wrote:

"Box 67 is definitely 5/4"

are you sure ?

My reading of BIM81260 seems to indicate the basi period ends 31st March if we are doing a set of acounts for period 01/12/2022-31/3/2024.

in the text below it sems to say end date ref working out basis period is accounting date end if that is 31st March? - could i be misreading that text ?

BIM81260

The transition part is the period that begins immediately after the standard part and ends on either:

5 April 2024 or
The late accounting date if this falls on 31 March to 4 April inclusive (and there is no election to disapply the late accounting date rules).

If the accounts in the 2023-24 tax year are drawn up to an accounting date of 31 March to 4 April 2024 inclusive, the late accounting date rules (see BIM81210) will apply for the transition part.


The transition part ends on 31 March, yes, but the basis period ends on 5 April. The days in between 31 March and 5 April are technically in the basis period but aren't in the standard part or transition part - they are shifted into 2024/25 for tax purposes. Frankly I don't think it matters whether you put 31/3 or 5/4 in box 67, but as we're looking at this in detail on this thread it's worth mentioning.
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Replying to Ardeninian:
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By rmillaree
23rd Apr 2024 16:02

ok thanks for that additional post - i now agree that the basis period ends on the 5th april - the text i was looked at previously wasnt as clear as the text below in hs222 (or i ws misreadiung it !!) . This confirms that there is the 3rd element to the basis period albeit as this is simply the 1st - 5th april the profits here are deemed to be in the next year ann ignored - but the basis period does still exist as far as the tax return is concerned!

https://www.gov.uk/government/publications/how-to-calculate-your-taxable...

9.1 Basis period for 2023 to 2024
If you started the business before 6 April 2023 and did not cease before 6 April 2024, your basis period begins from the end of your basis period for 2022 to 2023 and ends on 5 April 2024. For example, if your basis period for 2022 to 2023 ended on 31 December 2022, then your basis period for 2023 to 2024 is 1 January 2023 to 5 April 2024.

The basis period for 2023 to 2024 is made up of 3 separate components:

the standard part
the transition part
days following a late accounting date

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By DonDan
15th Apr 2024 17:33

Did you ever get a response from Iris as to what the problem was and when it was due to be fixed?

I have exactly the same issue and all Iris could tell me is that they would request a call back from someone in the technical team.

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By DonDan
16th Apr 2024 11:03

I've just had the following reply from Iris on this issue:

"Thank you for contacting Iris Support. We have been investigating your query. When there is a 5th April year end 2024, the period is not liable for any Transition Profits. However, we are aware that there are some instances where the current year end has been extended to a long period that ends 31st March-5th April 2024, then the transition profits are not being calculated.
We currently have an outstanding query on this scenario with HMRC to get further clarity on whether an extended period is subject to transition profits.
Please see our knowledge base article:-
Personal Tax - Basis Period Reforms and Transitional profits 2023/2024 onwards | Knowledge Base (iris.co.uk)"

It seems they are claiming they had no idea an extended year end would result in transition profits and are now waiting for confirmation of this from HMRC.

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Replying to DonDan:
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By lionofludesch
16th Apr 2024 11:16

DonDan wrote:

I've just had the following reply from Iris on this issue:

"Thank you for contacting Iris Support. We have been investigating your query. When there is a 5th April year end 2024, the period is not liable for any Transition Profits. However, we are aware that there are some instances where the current year end has been extended to a long period that ends 31st March-5th April 2024, then the transition profits are not being calculated.
We currently have an outstanding query on this scenario with HMRC to get further clarity on whether an extended period is subject to transition profits.
Please see our knowledge base article:-
Personal Tax - Basis Period Reforms and Transitional profits 2023/2024 onwards | Knowledge Base (iris.co.uk)"

It seems they are claiming they had no idea an extended year end would result in transition profits and are now waiting for confirmation of this from HMRC.

Bless me!

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Replying to DonDan:
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By lionofludesch
16th Apr 2024 11:18

".... the period is not liable for any Transition Profits."

Liable? What does that mean? Do they not pay tax on profits beyond the pre-existing year end?

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Replying to DonDan:
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By Paula@Butt
16th Apr 2024 11:44

I have received exactly the same email and I even sent them over the results from the HMRC calculator

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Replying to Paula@Butt:
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By DonDan
16th Apr 2024 11:50

I did the same thing as well. I'd have a bit more respect for them if they just held their hands up, admitted to the [***] up and told us when the fix would be out.

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Replying to DonDan:
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By rmillaree
16th Apr 2024 11:48

i still havent seen anyone post any proof positive guidance from hmrc ref what should be in box 64

i have emailed btc asking their advise and will report back here

are you able to manually include lower profit in box 64 and manually enter totals in 73/73.1/73.2/73.3 and 69 to get to back to correct calcs ? that seems to be how its being suggested it should be done in the absenace of anyone saying otherwise

the lack of a worked example from hmrc detailing the box by box entries on the txa return to me is teh root of the problem - surely soemone by now has done a worked example that has ben approved by their software ? for period where year end has been lengthened and is less than 18 months

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Replying to rmillaree:
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By Ardeninian
23rd Apr 2024 12:05

Box 64 should contain the tax adjusted profit of the accounting period you are completing the page for. Any adjustments to get to the basis period figure should be in box 68. It's worked like that for years - the only difference this time is that any transition profit also needs to be adjusted out as well.

The online calculator gives you box by box figures - it should tell you what to put in box 64 and the other boxes.

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Replying to DonDan:
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By master54
17th Apr 2024 09:53

They sent that post out to everyone who complained ; in the first instance i met a wall of silence from the Customer Support (ha ha well they call it that ) , two weeks later that generic e mail appears . All the signs of a company who have grown to big to fast and taken their eye of what really matters ie ' their customers'
Cant remember the last time i defended my old employers (HMRC) , but it shows how contemptable Iris have become when they have to try to shift the blame on to HMRC . At least I'd have a little respect for them if they at least put their hand up and admitted they had messed up .
Anyone thinking of purchasing Iris software should really think again . They were market leaders pre covid ; but second half of last year they fell apart , this problem is only one example . Ed

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Replying to master54:
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By Paula@Butt
17th Apr 2024 14:40

My response to Iris yesterday -

Thank you for the response, but the HMRC calculator I sent to you is quite clear that there will be transitional profits to be spread over 5 years even if the accounting date is changed to 5 April 2024.

This is the guidance from the HMRC notes HS222:
9.3 The transition part
If the standard part ends on a date before 31 March 2024 the transition part begins from the end of the standard part and ends on 5 April 2024, or your accounting date if it is 31 March or 1, 2, 3 or 4 April.
For example, if your basis period for 2022 to 2023 ended on 31 December 2022 and your accounting date is 31 March 2024, the standard part of your basis period for 2023 to 2024 is 1 January 2023 to 31 December 2023, and the transition part is 1 January 2024 to 31 March 2024.
Overlap relief may be available to reduce the profits of the transition part (or exceptionally the profits of the standard part). You will find more information about overlap relief further on in this guidance.

Iris response received this morning –

Thank you for your email, this information has been sent to our development team for further investigation. If the period entered is the same year end as the previous year end the software will calculate the transitional profits for you. All the information on transitional periods is in our knowledge base article that has been sent in my previous email.

However, changing the period in the data entry screen to a date from 31/03 to the 05/04 has caused the transitional calculation not to appear. This has been raised with our development team who are currently awaiting an update from HMRC.

I do apologise for any inconvenience this has caused, as soon as we are updated we will contact you.

I am still not sure that she completely understood, but it does now look like progress.

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Replying to Paula@Butt:
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By lionofludesch
17th Apr 2024 14:49

"If the period entered is the same year end as the previous year end the software will calculate the transitional profits for you."

What? It'll be zero, won't it?

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Replying to Paula@Butt:
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By rmillaree
17th Apr 2024 14:55

"However, changing the period in the data entry screen to a date from 31/03 to the 05/04 has caused the transitional calculation not to appear."

presumably the 31/03 - 05/04 complication or non complication (ie ignored discrepancy) is a non issue here ? that fact theya er referring to that sounds like they havent gota clue about what they are talking about unles you brought that issue specifically into it. Ie whether is 31/3 or 05/04 will make no difference or very little difference if the wrong rounding of days is used.

I am still minded not to lay full blame on hmrc till someone posts concrete how to do it right advise from another software provier - i still dont understand how or why box 64 need to ignore the transitional element for long periods when i lok at the notes page - i am only preuming it is with tp removed as as adjustment is needed somewhere to get it to add up.

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Replying to rmillaree:
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By Matrix
17th Apr 2024 19:00

I have PMd you as I am happy with my boxes.

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Replying to Paula@Butt:
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By Paula@Butt
03rd Jun 2024 16:48

Has anyone had an update from Iris on correcting their software for basis period changes? I am just about to chase them.

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Replying to Paula@Butt:
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By gogarloch
03rd Jun 2024 16:57

there is an update due out at end of June that should fix it. there is a note under the original knowledge base article.

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Replying to gogarloch:
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By Tax101
04th Jun 2024 09:50

We were hoping the Spring service pack ( 24.1.4.33 ) would fix this. But sadly it doesn't.

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Replying to Tax101:
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By gogarloch
04th Jun 2024 10:05

We were too. A stack of returns we can't file from IRIS is annoying and a hit on cashflow. Fingers crossed the next update will fix it.

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By AdamJones82
16th Apr 2024 11:07

The most expensive software company can't get their software working correctly. Quelle surprise

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By Matrix
16th Apr 2024 19:19

There is definitely something wrong. I have overlap in excess of the transitional profits and it is causing an error.

Has anyone successfully filed?

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Replying to Matrix:
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By lionofludesch
16th Apr 2024 19:26

Matrix wrote:

There is definitely something wrong. I have overlap in excess of the transitional profits and it is causing an error.

Has anyone successfully filed?

What sort of error?

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Replying to lionofludesch:
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By Matrix
16th Apr 2024 19:28

It’s ok, I deducted the overlap manually and Taxfiler says it is ready to file. You are well out of this!

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Replying to Matrix:
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By johnthegood
13th Jun 2024 05:23

Matrix wrote:

There is definitely something wrong. I have overlap in excess of the transitional profits and it is causing an error.

Has anyone successfully filed?

This is one of the problems I have - how did you fix it?

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By rca.aca.bz
26th Apr 2024 10:46

I have the same problem with IRIS Elements. IRIS says

"Not getting any Transitional Profits in 2024 for my 05/04/2024 period, why?

When there is a 5th April year end 2024, the period is not liable for any Transition Profits. However, we are aware that there are some instances where the current year end has been extended to a long period that ends 31st March-5th April 2024, then the transition profits are not being calculated. We currently have an outstanding query on this scenario with HMRC to get further clarity on whether an extended period is subject to transition profits."

I guess I won't be submitting any returns that have transitional profits yet - shame as it's detrimental to my cash flow!!!!

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Replying to rca.aca.bz:
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By rmillaree
26th Apr 2024 11:05

to be fair to IRIS i have not seen any sensible known to be correct specific guidance that advises whether the tranistional profit should be adjusted out of box 64 or box 68. This being the case i am currently in the same boat as IRIS - i must admit i havent checked with hmrc yet and i have gone through every line in the tax caluclation to see if that has the answer somewhere in the detail.

I would say their response is very poorly worded if hmrc simply havent done their job.

Is it not possible to do botch job here on IRIS - on btc i can botch it any which way i want - ie can the adjustment not be put through box 68 manually or can the transitional peirod numbers be removed from box 64?

unless i am missing something i expect (this is gut shot gues i must admit) hmrc will at some stage soon officially advise that box 68 should include reduction for transitional period even though the notes to the tax return say the following at present "Do not include any transition profit or loss in this box."

cue an update from hmrc this afternoon

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Replying to rmillaree:
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By Paula@Butt
26th Apr 2024 11:55

rmillaree wrote:

Is it not possible to do botch job here on IRIS - on btc i can botch it any which way i want - ie can the adjustment not be put through box 68 manually or can the transitional peirod numbers be removed from box 64?

That's a hard no! We have tried every which way to make the numbers work . Iris just don't allow manual intervention in the returns

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Replying to Paula@Butt:
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By rmillaree
26th Apr 2024 12:09

how about getting the tip-ex out of the bottom of the stationery cupboard ?

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Replying to rmillaree:
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By FactChecker
26th Apr 2024 15:12

Tried that ... but it didn't 'stay in place' when I scrolled down the page!

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Replying to FactChecker:
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By rmillaree
01st May 2024 16:40

Doh - why did you scroll down - you are meant to buy secondary monitor for doing that !

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Replying to rca.aca.bz:
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By Matrix
27th Apr 2024 05:36

rca.aca.bz wrote:

I guess I won't be submitting any returns that have transitional profits yet - shame as it's detrimental to my cash flow!!!!

My software worked for me and my client’s repayment has been issued (it took 6 days). If your software is not working then file through HMRC.

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Replying to Matrix:
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By rca.aca.bz
01st May 2024 16:21

Did your client do a long period of accounts to finish on 31/03/2024? I think this is the problem I am encountering, as even with HMRC software, if I put the figures in the transitional boxes (transitional profit and overlap relief b.fwd) it still taxes the whole of the (in this case) 22 month period in full without any relief for the overlap profit or transitional relief.

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Replying to rca.aca.bz:
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By rmillaree
01st May 2024 17:03

i have checked hmrc software and it seems to be working correctly ! - albiet my test period was shorter than 22 months

the important boxes to complete are as follows

"If your basis period is not the same as your accounting period, enter the adjustment needed to arrive at the profit or loss for the basis period. Put a minus sign (-) in the box if the adjustment is negative: (optional)"

this is the key box - you need to enter profit for transitional period in this box as negative total - note teh earlier boxes up to that point should be detailing profit for full period

your adjusted profit should now be for main 12 month period only

"Basis period transition profit or loss
Profit or loss of the transition part of the basis period. Put a minus sign (-) in the box if a loss: (optional)"

enter profit for transitional peirod here

"Overlap relief used on the transition part of the basis period this year: (optional)"

enter overlap ptrofit to be claimed (if any) here

"Spread of the transition profit treated as arising in this tax year: (optional)"

another key box you enter in here the transitional less overlap amount to be taxed this year - eg 20% of the net of the two

on tax calcs the main period profit element will show as normal

and the tax on the transitional period will be included half way down the calculation just to make it confusing

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Replying to Matrix:
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By rmillaree
01st May 2024 17:07

Note Matrix that i have satisfied myself that the correct way to enter the figures is by entering full period profit in box 64 and negative amount for transitional period in box 68. its probably the same end result as adjusting box 64 downover to take out the transitional period but in the full detail of the working calcs its clear that the negative adjustment is needed in box 68 - even if the specific notes on the self employemnt pages are kind of suggesting one should not do that.

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Replying to rmillaree:
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By Matrix
01st May 2024 19:35

My client has received his repayment and I had checked it all using HMRC software before filing.

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Replying to Matrix:
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By rmillaree
01st May 2024 19:50

its a very minor point
as long as the numbers add up whether you adjust box 64 downover or do the same adjustment in box 68 - it will be the same net result. the only reason for my post is that subsequent to our prior discussion as per useful other posts its seems clear that the 68 is the box to use.. No biggie if the calc is identical.

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Replying to rmillaree:
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By Matrix
01st May 2024 19:54

Well there was no interaction at the time so I went away and figured it out.

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By Jim Cornock
10th Jun 2024 12:00

And the latest IRIS update 24.1.4.33 still doesn't fix it!!

Lovely comment - "we have recently been advised.......". Everyone else knew about this months ago!

"UPDATE MAY 2024: We have recently been advised by HMRC on how to cater for this scenario (on extended periods) on the Tax Return and will be working on an update for this to be released in Late June 2024. NOTE: IRIS version 24.1.4.33 was not planned to resolve the known issue with extended etc periods/not getting the profits."

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