Transition profits over 5 years

Have hmrc explained exactly how this will be assesed

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Have hmrc told us exactly how this transitional profit will be taxed.  Will the extra profit be taxed over 5 years by some system or will the whole profit for the extended period be taxed over 5 years.  Presumbably class 4 will be split the same?

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By Wanderer
22nd May 2023 12:51

Haven't read the legislation but can be pretty sure it's option 1. The alternative you suggest would be nonsensical.

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By SteveHa
22nd May 2023 15:20

Which makes it more likely, given HMRC's track record.

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By Wanderer
22nd May 2023 16:04

Noted, however fortunately HMRC don't write the law.

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RLI
By lionofludesch
22nd May 2023 18:01

One fifth of the excess will be assessed in each year.

But you can choose to accelerate it. Which might be useful for somebody near one of the thresholds.

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RLI
By lionofludesch
22nd May 2023 19:33

.

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By chancewind
23rd May 2023 09:17

Do we know how the "excess" profit will be calculated?

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Replying to chancewind:
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By Ardeninian
23rd May 2023 09:51

BIM81200ff has plenty of examples, particularly BIM81290 and BIM81310

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Replying to chancewind:
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By possep
23rd May 2023 10:10

Yes, separate period of accounts, usual calculation for months of accelerated period less overlap and result / 5

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RLI
By lionofludesch
23rd May 2023 11:01

possep wrote:

Yes, separate period of accounts, usual calculation for months of accelerated period less overlap and result / 5

I disagree on separate period of accounts. As I understand it, you can apportion a period of, say, fifteen months.

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Replying to lionofludesch:
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By possep
23rd May 2023 14:01

no doubt you could apportion but I won't be. I will follow example 15:

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81290

Fully aware of what happened to Rupert Grint and his 23 month period of accounts. I will have 18+ months periods of account for any clients not already converted to 05/04 year ends. The "normal" 18+ period rules don't apply in the transitional year but where there is no year end change HMRC pro rate the 2 sets of accounts. I will change the year end.

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Replying to possep:
RLI
By lionofludesch
23rd May 2023 14:21

possep wrote:

no doubt you could apportion but I won't be. I will follow example 15:

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81290

Fully aware of what happened to Rupert Grint and his 23 month period of accounts. I will have 18+ months periods of account for any clients not already converted to 05/04 year ends. The "normal" 18+ period rules don't apply in the transitional year but where there is no year end change HMRC pro rate the 2 sets of accounts. I will change the year end.

Twenty months - but there was a different issue at stake there.

But that's an interesting point. If there were a cessation, you'd be grand with a 23 month set of accounts. But there's no cessation here.

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Replying to chancewind:
RLI
By lionofludesch
23rd May 2023 10:57

chancewind wrote:

Do we know how the "excess" profit will be calculated?

Apparently "we" don't. But it's profits of the period from the old accounting date to the new one, less overlap relief.

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