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All the best,
The SK Accountants team
Thank you for getting in touch. A member from our friendly team will aim to get back to you shortly.
All the best,
The SK Accountants team
In the second blog of this series on tax year basis reforms, we will examine how these changes could affect unincorporated businesses.
We touched on the practical implications of the reform in our previous blog.
How does this change affect me?
As mentioned in our previous blog, the step away from the “current year” basis to a “tax year” basis is part of the Government’s commitment to improving, innovating and aligning the tax system.
These basis period reforms will predominantly impact all unincorporated businesses that do not have a 31 March/5 April accounting year-end.
This impact will be felt the most by businesses with a year-end early in the tax year, leading to more complex administration and a great financial impact, at least during the initial transition year.
Administrative Impact
Businesses should start making preparations now to handle the forecasted administrative implications of the tax year basis reforms.
This includes the effect these reforms will have on the timescales for the preparation of accounts along with the submission of tax return, particularly where a longer or shorter accounting period occurs due to the change in dates.
When you look at the scope of the tax year basis reforms in conjunction with the Making Tax Digital (MTD) income tax quarterly reporting, there will be an increased concentration of workloads within many unincorporated businesses.
Because of this increase in workload, the resulting strain on resourcing could see the cost of this falling on the clients of these firms.
Financial Impact
Owing to these changes, the tax will be payable nearer to real-time.
This could mean that in the period January 2024 to January 2025, there could be businesses that will need to finalise three years accounts, due to overlap.
What’s more, certain reliefs may need to be pro-rated and some businesses could see a substantially higher tax bill in their transition year, which needs to be repaid more quickly.
This tax charge could have a significant and somewhat unexpected impact on cash flow, which for many firms is already constrained by recent events.
The key takeaways are as follows:
If you are worried about how these reforms will affect your business, get in touch with us today.
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