Next question.... the "gap" either side of the year of change would be 7 months so we'd create overlap by using 5 months' of profit from the previous period.
Overlap will mostly become a thing of the past under the new provisions but actually in this case they'll already have overlap (Aug year end) and create more on a change of date. And so the only relief they'll get for that when leaving the business.
If they didn't change the year end they wouldn't create any additional overlap and would be able to utilise the existing overlap in the transitional year.
Thus they'd be better off from a tax perspective not changing the accounting date - notwithstanding any non-tax issues at play.
If you happen to be reading this and believe me to be talking nonsense please shout!
I wonder if anybody has any thoughts on this scenario please... a business with an August year end wishes to change it's accounting date to 31 March year end so that they are not needing to estimate profits under the proposed new rules.
However, swapping from August to March results in a 19-month basis period which isn't permitted under the rules (any change in accounting date cannot result in a period exceeding 18 months). So if they did it, it wouldn't be recognised by HMRC and, under current legislation, the business would continue to be taxed on an August year end.
Yet the new rules won't tax them to an August year end; the business will be assessed on profits in the tax year. So a formal change to 31 March wouldn't be recognised by HMRC - except it would because that's how it's going to tax things from now on.
I am therefore concluding that the business CAN change to 31 March and even though the tax return will show the year end as 31 August, it'll actually be taxed to 31 March in any case and so everyone is happy.
Is that how others would view a scenario such as this or am I looking at things the wrong way?
My answers
Easy peasy. I was clearly over-thinking things!
Next question.... the "gap" either side of the year of change would be 7 months so we'd create overlap by using 5 months' of profit from the previous period.
Overlap will mostly become a thing of the past under the new provisions but actually in this case they'll already have overlap (Aug year end) and create more on a change of date. And so the only relief they'll get for that when leaving the business.
If they didn't change the year end they wouldn't create any additional overlap and would be able to utilise the existing overlap in the transitional year.
Thus they'd be better off from a tax perspective not changing the accounting date - notwithstanding any non-tax issues at play.
If you happen to be reading this and believe me to be talking nonsense please shout!
Hi everyone
I wonder if anybody has any thoughts on this scenario please... a business with an August year end wishes to change it's accounting date to 31 March year end so that they are not needing to estimate profits under the proposed new rules.
However, swapping from August to March results in a 19-month basis period which isn't permitted under the rules (any change in accounting date cannot result in a period exceeding 18 months). So if they did it, it wouldn't be recognised by HMRC and, under current legislation, the business would continue to be taxed on an August year end.
Yet the new rules won't tax them to an August year end; the business will be assessed on profits in the tax year. So a formal change to 31 March wouldn't be recognised by HMRC - except it would because that's how it's going to tax things from now on.
I am therefore concluding that the business CAN change to 31 March and even though the tax return will show the year end as 31 August, it'll actually be taxed to 31 March in any case and so everyone is happy.
Is that how others would view a scenario such as this or am I looking at things the wrong way?
Many thanks