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Puzzle AccountingWEB Solving the basis period reform puzzle
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Solving the basis period reform puzzle

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Exactly what goes where on the self assessment tax return isn’t always clear when a taxpayer is affected by basis period reform. Emma Rawson takes a closer look at the practicalities.

21st Jun 2024
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As part of the usual compliance cycle, many agents will currently either be working on or looking to get started with their client’s 2023/24 self assessment tax returns. Unfortunately, for those affected by basis period reform, this year presents some particular problems when it comes to figuring out what goes where on the return. 

The basics

The first thing to note is that businesses affected by basis period reform have to use the full version (SA103F) of the self-employment pages in 2023/24, as the short version (SA103S) doesn’t allow for transition profits to be reported.

The other hard and fast rule is that, provided the business started before 6 April 2023 and did not cease in the year:

  • the basis period start date in box 66 will be the day after the basis period for 2022/23 ended; and
  • the basis period end date in box 67 will always be 5 April 2024. 

Beyond that, things get more complicated. As a general rule, when completing the SA103F we need to:

  • report the results of the accounting period up to box 64/65,
  • bring in any basis period reform adjustments in the second part of the return. 

Whilst this might sound relatively simple, exactly how it works in practice will depend on what accounts the business draws up. 

A simple example

Let’s start with the simple example of a business which always draws accounts up to 31 December each year and has no plans to change.   

In 2023/24 they will be taxed on the profits of:

  • the year ended 31 December 2023 (the ‘standard part profits’); and
  • the period from 1 January to 5 April 2024 (the ‘transition part profits’).

To calculate the transition part profits, the results of the year ending 31 December 2024 will need to be time apportioned. They can then:

  • deduct any overlap relief from their transition part profits; and
  • spread any remaining excess ‘transition profits’ over up to five years.

In the 2023/24 SA103, they will report:

  • The results for the accounting period ended 31 December 2023 in boxes 15 – 65
  • Their total transition part profit or loss (before overlap and spreading) in box 73.1
  • Their overlap relief claimed in box 73.2
  • The amount of the spread transition profits actually being brought into account in 2023/24 in box 73.3

Change in accounting date

To avoid the ongoing consequences of basis period reform, many businesses may look to change their accounting date to 31 March or 5 April in 2023/24. Whilst this is undoubtedly a sensible move, it does complicate things when it comes to reporting on the self assessment return.

To make this change, the business could draw up one long set of accounts, or two sets.

If they go for one long set of accounts, they will report the results for the whole accounting period in the first half of the SA103F but will then have to strip out their transitional profits in the second half before bringing them back in again.

For example, a business that used to have a 31 December year end which now decides to draw up a long set of accounts to March will have to:

  • Report the results for the full fifteen-month accounting period ended 31 March 2024 (which will include both the standard part and transition part profits) in boxes 15 – 65
  • Strip out the transition part profits (before overlap and spreading) via a negative adjustment in box 68
  • Bring those transition part profits back in as a positive adjustment in box 73.1
  • Claim their overlap relief in box 73.2
  • Report the amount of the spread transition profits actually brought into account in 2023/24 in box 73.3 

Things get even more complicated if they draw up two sets of accounts instead. 

Sticking with a 31 December year end, instead of one long set of accounts they could draw up two sets – one for the year ended 31 December 2023 and a second set for the three months to 31 March 2024.

In this scenario, the business should strictly prepare two sets of SA103F pages – a main set covering the later three-month accounting period and a second supplementary set covering the earlier 12-month accounting period. 

The problem is that the ‘main’ SA103F still needs to report the total taxable profits for the year. To achieve this, they have to enter a ‘balancing adjustment’ of sorts in box 68 to make sure the standard part profits are reported in box 73. They then bring the transition part profits back in later in box 73.1 onwards. 

Need help?

Readers who have got this far might be forgiven for feeling a sense of despair, especially if they have multiple clients affected by basis period reform. However, there is help out there. 

A detailed article on the ATT website covers all the above in much more detail. HMRC’s guidance, including their transition profit calculator and help sheet HS222 (in particular worksheet 3), might also help. 

However, a word of warning – if you use the transition profit calculator you need to say you’re filing on paper (even if you won’t be) to get the SA103F box references, and if you’re changing accounting date via two sets of accounts it will only tell you what to put on the ‘main’ SA103F.

It sometimes feels like basis period reform really is the gift that keeps on giving, with more complexities cropping up all the time. No doubt this won’t be the last article looking at practicalities – if readers have any suggestions for other areas to cover do get in touch.

Replies (32)

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By claudialowe
24th Jun 2024 09:15

Thank you Emma - you have solved the exact problem I was having last week. It doesn't help that the notes say about box 68 "Do not include any transition profit or loss in this box" By the time I have done the final one, I will have mastered the subject ;-)

Thanks (5)
Replying to claudialowe:
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By rmillaree
24th Jun 2024 09:28

It doesn't help that the notes say about box 68 "Do not include any transition profit or loss in this box"

yep - you couldnt make it up really. you enter that exact figure in the box notes hmrc say dont enter here - ok it is a negative total and total could perhaps be different but hmrc really do know how to confuse all and sundry by saying dont do when you do do (ron would not have made that mistake)

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Replying to rmillaree:
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By FactChecker
24th Jun 2024 18:25

'I met him on a Monday and my heart stood still'? or just Crystal clear?

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By Ammie
24th Jun 2024 10:36

Thanks Emma, a very informative article. Saves me overheating with frustration!

Thanks (5)
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By whiteways
24th Jun 2024 10:57

I am completely stuck as I cannot get overlap relief figures. I applied to HMRC for these on 22 cases back in April. It was supposed to take 15 days, but two months later and I’ve still heard nothing.

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Replying to whiteways:
Emma Rawson
By Emma Rawson
24th Jun 2024 11:54

We are aware of some delays, mainly due to the volume of requests that are coming through. We've asked HMRC for an update, especially as we know this is delaying returns going in. As and when we learn more we'll keep people posted.

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Replying to whiteways:
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By Rozzi Rainbow
25th Jun 2024 09:29

I was advised on an Any Answers post to get these via the webchat. It takes a long time to be put in the queue for an adviser, and the first client I tried it for it wasn't available (due to an adjustment in the second year of trading which needs looking into) but on my second attempt yesterday, for another client, I managed to get the figure.

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Replying to Rozzi Rainbow:
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By whiteways
01st Jul 2024 13:41

Will Webchat handle a call on all these caes, or would I have to apply to them 22 times?

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By sallycox
24th Jun 2024 11:29

Great article Emma! All clearly explained. By far the best article I have seen on this thorny topic.

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By [email protected]
24th Jun 2024 12:01

.

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By tractorboy
24th Jun 2024 12:10

The entries for someone who, prior to the changes would be creating overlap profit in this year with a non-coterminous accounting year end (i.e.. 30 September rather than 31 March or 5 April) seem to result in a strange computation. Has anyone looked at this? i.e. in a world before the new rules this would be the second year of being a partner and the year on which overlap is created, the previous year basis period being the tax year.

If I follow the guidance notes then I have an entry for the accounting period profits being adjusted by the profits that have already been taxed in the previous tax year, and then the transitional profit being included covering the period from the end of the accounting period to the tax year end.
This seems to not produce the expected result as it effectively means overlap relief is being created and used in the same year and not being used against the transitional profits. It results in a comp showing very small profits in the top section and then significant transitional profits which in theory could be spread. Just doesn’t seem right. Anyone who has a different suggestion would be appreciated?

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Replying to tractorboy:
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By rmillaree
24th Jun 2024 13:13

i think you would need to provide calcs to prove your point here

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Replying to rmillaree:
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By tractorboy
24th Jun 2024 15:40

If an individual joined a partnership on 6 April 22 that had a 30/9 year end then figures on the individual’s 22/23 return are their share of the profits from the y/e 30/9/22 with an adjustment to include profit share from 1/10/22 to 5/4/23 from the profits for the y/e 30/9/23. In 23/24, prior to the basis period reform, the figure from the 23/24 partnership statement would have been the profits for the 23/24 personal return which would have created overlap relief equal to the period 1/10/22-5/4/23 which was already taxed in 22/23.

Now the entries we seem to need are basis period dates of 6/4/23 to 5/4/24 and in box 8 the figure from the partnership statement with an adjustment in box 9 to remove the profits relating to 1/10/22-5/4/23. The profits 1/10/23-5/4/24 then are the transitional profits that are entered in box 16.1. The comp then shows the 6/4/23-30/9/23 profit as the partnership profit share on the tax computation and the tax charge on the profits 1/10/23-5/4/24 is shown on the bottom half of the comp. This feels like it is likely to cause a real problem for anyone wanting a mortgage and the lender thinking that their profit share is only the 6 months profit shown as partnership profit and not the full 12-month entitlement.

I am comfortable that the right tax is being paid but the layout of the computation and the treatment of the effective overlap being created seems to be being treated incorrectly. It feels like the box overlap relief created should still exist. This could then have the figure there instead of box 9 for the adjustment needed and it would be deducted from the transitional profits the same as the long-standing partners.

The current box entries mean that the partner could pay tax on 6 months profit and spread the tax on the other 6 which does not seem the intention but following the notes for each of the mentioned boxes results in the entries as stated.

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Replying to tractorboy:
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By Ardeninian
25th Jun 2024 10:55

This is actually more straightforward than you're making it. Simply put, there is no transition part.

The standard part is the first 12 months of the basis period which is 6/4/23 to 5/4/24. There is no overlap profit created or used. The box 8 figure which should show the profit share for ye 30/9/23 will need to be adjusted to remove 1/10/22 to 5/4/23 and add in 1/10/23 to 5/4/24. No entries should be in box 16.1-16.4 as there is no transition part.

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Replying to Ardeninian:
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By Ardeninian
25th Jun 2024 11:46

Ardeninian wrote:
The box 8 figure which should show the profit share for ye 30/9/23 will need to be adjusted...

Apologies, missed the edit window - what I mean here is that the box 8 entry should be the figure from the partnership statement for 30/9/23. The net adjustment (ie the removal of 1/10/22 to 5/4/23 and the addition of 1/10/23 to 5/4/24) should be in box 9 as you would expect.

Thanks (2)
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By Philip_Winter
25th Jun 2024 17:50

Excellent article. Thank you.
Can you do the same for how and which boxes to complete on a partnership SA104F for a partner in a partnership which extended its 2023/24 accounting period end date from 31 December 2023 to 31 March 2024 and drew up 15 months accounts 1 January 2023 to 31 March 2024?

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Replying to Philip_Winter:
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By Ardeninian
26th Jun 2024 09:33

Copy the profit figure from box 11 on the partnership statement to box 8 on the SA104F (or loss figure from box 12 as a negative). Assuming the partner's basis period in 2022/23 ran to 31 December 2022, put 3/15ths (91/456ths) of the box 8 figure in box 9 as a negative (eg if box 8 £15,000, enter minus £3,000 in box 9). Then put the reverse of the box 9 figure in box 16.1.

Box 9 adjusts the profit share figure from the partnership statement (which contains both the standard and transition profit) to reflect just the standard profit. The transition profit is then entered in box 16.1.

Thanks (1)
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By accountedfor1
26th Jun 2024 11:20

Box 68 starts with "if your basis period is not the same as your accounting period". If you change your accounting date to finish on the tax year end date, is there a difference in the basis period and accounting date?

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Replying to accountedfor1:
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By Ardeninian
26th Jun 2024 13:29

The reference to basis period is really a reference to the standard part, because you have to ignore transition profit. So in most cases where the accounting date has changed you will need to use the box, even though technically the basis period and the accounting period may be the same

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Replying to Ardeninian:
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By accountedfor1
26th Jun 2024 14:30

I hear you but I'm still not sure. The HMRC guidance states for box 68: you may have to add together accounting periods or apportion the total. That seems to suggest that you only use box 68 if you are using two accounting periods to arrive at the P/L for the tax year i.e. not if you are changing the accounting date?

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Replying to accountedfor1:
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By rmillaree
26th Jun 2024 17:23

That seems to suggest that you only use box 68 if you are using two accounting periods to arrive at the P/L for the tax year i.e. not if you are changing the accounting date?

nope - the fact it says may means it may or it may not - it seems to me they are been obviously vague here and therefroe one shouldnt presume anything.
note its all hopeless anyway as the only clear statement ref box 68 notes is "Do not include any transition profit or loss in this box" and lo and behold you probably do enter that figure as a minus.

to me its clear that for one period all period profits end up in box 64 and box 68 takes out the transitional period and this tallies with exactly what is described in the working calcs notes and preumably also on the online checker too.

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By accountedfor1
27th Jun 2024 09:48

OK, to be clear then, if we change the accounting period to say 5 April 2024 from 31 December 2023, then we still enter 31 December in box 67 (closing basis period date), as we are not including the transition period. Presumably in the following year, the basis period is 6 April 2024 to 5 April 2024.

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Replying to accountedfor1:
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By Ardeninian
27th Jun 2024 14:09

No, because the basis period ends on 5 April 2024, so that is the date that goes in box 67

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Replying to Ardeninian:
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By accountedfor1
27th Jun 2024 14:26

In that case nothing goes into box 68 as the basis period will be the same as accounting period?

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Replying to accountedfor1:
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By rmillaree
27th Jun 2024 15:32

the basic notes ref box 68 and imho plain wrong or misleading - this is creating a alot of the confusion

Ardeninian is 100% correct though that box 68 is used

you can prove this by one of 3 methods

1 enter the information in the hmrc link (paper return) and it will spew out all the boxes that need completing and box 68 will be populated as advised

https://www.tax.service.gov.uk/guidance/work-out-your-transition-profit/...

2 work through the relevant calculation guidance and that will confirm box 68 needs completing.

3 if you ring hmrc they should hopefully be able to confirm it is what it is despite what the notes say.

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Replying to accountedfor1:
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By Ardeninian
27th Jun 2024 16:18

accountedfor1 wrote:

In that case nothing goes into box 68 as the basis period will be the same as accounting period?

I already answered this above (your earlier question). But for the avoidance of doubt: where there is a transition part, for box 68 purposes ignore it. But not for box 67.

Box 67 wants the end date of the basis period, which is 5 April 2024 for any business that isn't ceasing in 2023/24. Box 68 is an adjustment box, it needs to have the difference between the accounts profit/loss figure in box 64/65 and the standard part profit amount.

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Replying to Ardeninian:
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By accountedfor1
27th Jun 2024 16:28

If that's the case, then I think we are all agreed that the wording of the tax return at box 68 is wrong.

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Morph
By kevinringer
01st Jul 2024 12:59

Also note that if there is more than one accounting period and 2024 TR is filed online, it will be special case 8 (see https://www.gov.uk/government/publications/self-assessment-technical-spe...) requiring you to file the first period as a PDF and the second in the Return. For example, if a 30 April year end business changes it's year end to 31 March, it can have one account 01/05/2022-31/03/2024, but one 23-month account won't give much meaningful information, so we're generally preparing 12 months 01/05/2022-30/04/2023 then 11 months 01/05/2023-31/03/2024. We're required to attach a PDF of the 12 months to 30/04/2023. The special case workaround would have been more logical if it required the 12 months to 30/04/2023 reporting on the return together with a PDF of the 11 months to 31/03/2024. Of course, it would be even more logical if HMRC could get its IT to accept multiple periods because, as far as I know, all third party software can handle multiple periods, so why can't HMRC?

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Replying to kevinringer:
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By rmillaree
01st Jul 2024 14:56

. We're required to attach a PDF of the 12 months to 30/04/2023.

thats not how i read the notes - i read the notes as saying simply that two self employed pages should be completed - although it does say submitted via an attachment i have presumed they simply mean that we add a second set of sole trader pages. I would say i am not preuming my reading of tis guidance is correct and your method wrong - either way wording is slightly sketchy i would say.

Additional Self Employment pages for any other accounting periods should be submitted as an attachment with an explanation given in white space (additional information).

note when you complete 2 pages the 12 month set will have the normal first 12 profits that are taxed and the other later set will effectively be in and taken out via box 68 - adjusting back in amounts toi be taxed and any relevant basis period

as per notes here
One set of Self Employment pages should be completed with details of the latest accounting period and FSE66 to FSE82 as appropriate, should be completed to arrive at

i havent done one yet but i am sure that worked when i did a dummy test run to get figures expected on tax comp

Thanks (1)
Replying to rmillaree:
Morph
By kevinringer
01st Jul 2024 15:33

That's an interesting point. Our software (PTP) will only accept PDFs as attachments, so our software guidance is to create a PDF of the first period and attach it. I have been in discussion with our software support about this. Given we're almost a third of the way through the 2024 filing window, it's rather late in the day to be trying to figure these issues out.

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Replying to kevinringer:
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By rmillaree
01st Jul 2024 16:18

i kind of presume when they say attachment they simply mean a second set of self employed pages which PTP can presumably generate rather than pdf attachment.

Ideally clarification is needed here as you wouldnt want to be relying on hmrc doing an adjustment based on pdf attachemnt with relevant notes.

I wouldnt expect the software supplier to get it wrong here - so if they are saying do it that way i wouldnt argue with tjem - but its reasonably clear to me that this note 8 is somewhat sketchy at a minimum.

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By AJACK
11th Jul 2024 22:12

Great article! what about partnership returns - if we extended the AP do we reflect that on one partnership return? We have some accounts colleagues who have jumped the gun and prepared accounts to the YE 31 December 2023 when the client may want to change the AP to 31 march. I am inclined to say the accounts need redoing to 31 March 2024 for the partnership return!

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