Basis period reform for taxing self-employed people and business partnerships

Disappointingly, despite stakeholder feedback from this Institute pointing to the need to re-examine proposals to move to the tax year basis, the budget documents confirmed that the Government is proceeding with its plans. The change will apply from 2024/25 with a transition year in 2023/24.  Profits for each tax year will be based on the profits arising in the tax year itself, rather than on the profits of a 12-month set of accounts ending in the tax year.  Chartered Accountants Ireland recently wrote to the Financial Secretary to the Treasury calling for plans to move to a tax year basis to be shelved in light of the clear need for more detailed consultation on basis period reform.

According to an email from HMRC to the Institute, trading income will be taxed on the same basis as property and investment income and the tax deferral treatment under the current rules will be removed.  Further information will be published on Finance Bill publication day (expected next Monday) when legislation and a consultation response document on basis period reform will also be published.