Basis period reform – act now to avoid issues with the 31 January filing deadline

The impact of basis period reform on unincorporated businesses who don’t have a 31 March or 5 April accounting year end, is starting to be understood as those businesses move from the ‘current year basis’ to a tax year basis’ rule ahead of the 2024/25 tax year.

Basis period reform is having a significant impact on our members as they support their clients, and we continue to support with member queries and collate their feedback on this change and the impact on Tax Advisers and  their clients. We have regular dialogue with HMRC about the practical issues on the implementation of basis period reform.

Resources for our members

HMRC has issued guidance and online videos which cover the technical aspects of basis period reform. We also published articles in July 2023, October 2023 and March 2024 and released an on-demand webinar explaining the issues our members need to be aware of when supporting their clients.

HMRC has recently published a calculator to help work out the transitional profit for a client affected by basis period reform. It’s important to remember that transitional profits will automatically be spread under schedule 1 paragraph 72 Finance Act 2022 over five tax years, but it is possible to accelerate this so that the transitional profit is taxed over a shorter period.

HMRC’s overlap profit G-form

We have received positive feedback about HMRC’s G-form to request information about a client’s overlap profit figure. As the 31 January 2025 submission deadline approaches, we are aware that demand for the G-form is increasing and there will come a stage when HMRC is unable to guarantee that it could provide a requested overlap profit figure in time for a 2023/24 tax return to be submitted to HMRC before the submission deadline.

This increased demand is however having an impact on the turnaround of overlap profit requests. To help raise awareness on turnaround periods, HMRC has introduced a “Check when you can expect a reply from HMRC”.

Because of the additional demand, where an overlap profit figure is not known, we would encourage our members to contact HMRC using the G-form as soon as possible to help ensure that HMRC can respond to the request in time to submit the client’s 2023/24 tax return on time. This would avoid having to submit the client’s 2023/24 tax return by 31 January 2025 using estimated figures.

Let us know your views

Please let us know how basis period reform is impacting your practice and your clients.

We welcome your views more generally, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.