Basis periods to be abolished in 2022
Some unincorporated businesses will have bumper tax bills for 2022/23 as their accounts reporting is adjusted to fit exactly to the tax year from 6 April 2023, in preparation for MTD.
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This is a ridiculous minefield because VAT-registered businesses with quarter ends different to those above will need working on numerous times each year.
Only way around this ludicrous MTD is to file any old figure each quarter and adjust when the actual year-end accounts are prepared.
I recall reading somewhere a few weeks ago, there is a consultation also on simplifying the tax year for individuals so as to end on a month-end, no doubt 31 March would be good: it would then tie in with many company year end dates and also about 50% of VAT Return period ends.
Well there will be a 40 day period each quarter where no accountants or bookkeepers book annual leave, won't there! We already have well over 50% of our VAT registered clients filing VAT returns on those quarters. Add in the clients that are unincorportating and those that are already unincorportated and trying to manage staffing levels is going to be a nightmare! We try to get clients on to monthly bookkeeping but many end up sending a few bits during the quarter and the balance at the quarter end!
I suspect that all vat registered sole traders and partnerships will be compelled to move to June Sept Dec and March quarter ends !
From my experience 80%+ of sole traders already have an accounting year end that matches the tax year (or is 31 March), but no doubt there would be a not insignificant number that change their VAT period end as you suggest. This might be more of a problem for partnerships, but partneriships are far fewer in number than sole traderships at least (for their accountants to worry about).
I think a bigger problem will be for some businesses that have a year-end for a particular reason: eg retailers that have a 31 January year end, so they can do their stock take when the shop is mainly empty: empty of stock and empty of customers. April stock take for many businesses could be a right pain, particularly if they sell Easter eggs or what-have-you. Another example would be for those that work in the education sector: a year end of August makes sense, as often contracts follow school years, also there is no then no deferred or accrued income, and profits can be seen more easily, as accounting periods do not cross academic years. A 31 March year end will fall somewhere in the second term, and with varying Easter holidays... yuk!!!
It may be that those that want to keep a different year end date may just have to incorporate. I would imagine that most businesses that have these sorts of issues, such as stocktakes and educational businesses affected by a change of year end are already incorporated (or some other entity eg: charity or academy).
Your point re: companies I don't think is valid, a company tax year-end normally follows the accounting year end, so there won't be a similar problem for corporates, as they get to effectively choose what tax year end they want themselves, without an imposition. I do think the goverment would impose a tax year end date on corporates, it really would create too much havoc!!!
I wonder what the point is in all these changes especially for taxpayers reaching retirement age. I can't think of any benefits to them just extra cost and learning for now reason.
I foresee any clients who are nearing retirement age and are around the £10,000 to £30,000 income bracket jacking in earlier than they planned.
All changes to the tax system have been designed to make life easier for HMRC by dumping as much work as possible on the taxpayer (read accountant/agent).
Does it mean "accounting periods ending on dates 31/3 to 4/4"? Or should that be 31/3 to 5/4? Either way if anybody should want me I shall be in the sunset - yippee!
Does it mean "accounting periods ending on dates 31/3 to 4/4"? Or should that be 31/3 to 5/4?
No, of course it shouldn't.
You don't need to deem a 5/4 accounting period to end on 5/4. It already does.
Someone overheard a conversation last week at the HMRC MTD Dept
"Hey, someone just told me that not everyone has a year end of 5th April, is that true"
"not sure, that cant be right"
"best look into that, if so it will have to change"
"lets just change it anyway, no one will notice"
Oh wow. That logistical nightmare I've spoke of serval times regarding Mtd for income tax just got a whole lot more nightmarish. Maybe elm Street nightmarish.
What happens if we can't find overlap relief details? Are hmrc gonna supply them in advance? Doubt it.
This is gonna cause a massive problem.
What happens if we can't find overlap relief details?
Ask HMRC. They know.
You're going to need to know overlap relief one day. Why wouldn't you find out what it is when you take on the client ? Why not plan ahead ?
There are enough problems ahead without making up new ones.
I have asked them before to be told that their records don't go back that far! Perhaps it depends if they can be bothered or not?
I have asked them before to be told that their records don't go back that far! Perhaps it depends if they can be bothered or not?
Just guess then.
I'd be happy to wager that HMRC will find those records in the proverbial attic if you guess too much.
same here, can't get overlap relief details from anyone - previous accountant or HMRC and client has no records that far back
Then we must bombard HMRC with requests for the overlap relief figures for all our clients ! Make sure you send a separate letter for each client.
We carry it forward on the working papers every year. It is a slappable offence to be lazy and leave it off.
Personally, I completely agree with it as a simplification measure - basis periods have always been far more complicated than necessary. Can we get rid of POAs that clients don't understand at the same time!!
Don't fancy the workload consequences though!
Benybod I absolutely agree, and so do we. But there are one or two clients that came to us after the event and previous accountants did not provide overlap figures, so there will be some missing data for sure.
Does this change the position that up until now, self-employeds with a 31st March year end would not be caught by MTD for ITSA until 1st April 2024? (First accounting period beginning on or after 6th April 2023.)
Will the deeming of a 31/3 to 4/4 year end, to be a 5/4 year end, change this aspect?
Does this change the position that up until now, self-employeds with a 31st March year end would not be caught by MTD for ITSA until 1st April 2024? (First accounting period beginning on or after 6th April 2023.)
Will the deeming of a 31/3 to 4/4 year end, to be a 5/4 year end, change this aspect?
Imho, no.
But this is just a condoc. Not legislation.
It is legislation: https://assets.publishing.service.gov.uk/government/uploads/system/uploa...
To be passed in FA 2022.
So not legislation yet, then.
And could be subject to change. However unlikely that may be.
The crucial sentence -"a significant bunching of workloads for accountants..!" MTD for Income Tax just gets worse. Another reason why I'm going to be avoiding it.
HMRC dictating how business operate for the sake of their own, ill-conceived ideas that they themselves have repeatedly proved themselves incapable of implementing. And I have another 11 years before retirement. I wonder if Primark are recruiting?
Not sure I can cope with this.
We have to change the tax year end to 31st March surely.
Where is the benefit in this?
Not sure I can cope with this.
We have to change the tax year end to 31st March surely.
Why ?
HMRC say they'll accept 31st March as 5th April.
Is there not enough change for you as it is ?
Not sure I can cope with this.
We have to change the tax year end to 31st March surely.
Where is the benefit in this?
Do you think it's worth lobbying to get the overlap relief uplifted by RPI since is was incurred. Nice earner for the treasury due to up to 25 Years of fiscal lag? !!!!
Do you think it's worth lobbying to get the overlap relief uplifted by RPI since is was incurred. Nice earner for the treasury due to up to 25 Years of fiscal lag? !!!!
No.
It was rejected thirty years ago and it'll be rejected now.
But changing the year end was voluntary. Now that it will be compulsory nobody should lose out.
But changing the year end was voluntary. Now that it will be compulsory nobody should lose out.
How are they losing out ?
Nebs wrote:
But changing the year end was voluntary. Now that it will be compulsory nobody should lose out.
How are they losing out ?
By not getting indexation on their transitional overlap relief. Tax payable on profits earned today, less relief at 1996/7 levels. HMRC at the time said transitional overlap relief can be carried forward indefinitely - now they want to move the goalposts. Inflation has been roughly 100% since then, simple solution is to double all transitional overlap relief.
lionofludesch wrote:
Nebs wrote:
But changing the year end was voluntary. Now that it will be compulsory nobody should lose out.
How are they losing out ?
By not getting indexation on their transitional overlap relief. Tax payable on profits earned today, less relief at 1996/7 levels. HMRC at the time said transitional overlap relief can be carried forward indefinitely - now they want to move the goalposts. Inflation has been roughly 100% since then, simple solution is to double all transitional overlap relief.
It's not some sort of loan that the taxpayer has made to HMRC.
Generally, folk pay tax on profits twice because profits are rising and they'll pay less tax on profits earned earlier. If anything, HMRC are lending money to the taxpayer. Your logic is completely flawed.
You are paying tax on profits twice in the early years and don’t get the relief for it until later, how is that a loan from the government
You are paying tax on profits twice in the early years and don’t get the relief for it until later, how is that a loan from the government
You're paying tax on less than you earned year on year, building up a debt in small instalments. When you cease trading (or change your year end) you pay that debt back.
Do you not understand how overlap works ?
I can see this increasing clients tax bills when the change kicks in through no fault of theirs.
So what about VAT-registered unincorporated businesses already doing MTD for VAT (i.e. already on software) who have a non-5th April year end ?
Will they have to change too ?
Does any software cope with year end changes ?