Under the tax year basis of assessment for unincorporated businesses which takes full effect from 2024/25 (2023/24 being the transitional year) some businesses may have to file tax returns which include provisional figures, as they may not have drawn up accounts covering the whole of the tax year by the time the return for the year is due. HMRC is currently seeking views until 27 May 2022 on the methods that owners of unincorporated businesses with accounting year ends that differ from the tax year end could use to correct estimates in their tax returns. In order to do so, HMRC has prepared a technical paper summarising the issue of provisional figures and briefly setting out the three main options for easements alongside a fourth default option of keeping the current rules unchanged.
During the original consultation, questions 4a and 4b examined the issue of estimates/provisional figures. The basis period reform summary of responses set out the feedback HMRC received on the issue of provisional figures, highlighting the additional administrative burdens that respondents felt that providing provisional figures would cause.
Thereafter, the Government committed to exploring the subject further, considering whether and how to introduce administrative or policy easements. The response document set out the main options being considered to address the burden associated with provisional figures, but the government remains open to alternative suggestions for easements.
HMRC is aiming to use feedback from this informal consultation to help identify the best way forward, assessing the benefits of the various easements while taking into account the costs and challenges of proceeding with each.
HMRC would like to set a clear focus for this exploration on the administrative burdens of submitting and amending provisional figures; it is not intending to look in detail at specifying methods of estimation, or changes to the core basis period reform policy.
In addition to general easements for provisional figures, HMRC is also considering whether there are any partnership-specific easements relating to the submission of provisional figures that would be useful and are interested in understanding the specific issues that partnerships may face when partners submit provisional figures in the returns, and the impacts of introducing additional specific easements for partnerships.
The Government is open to suggestions in this area; for example, ideas put forward so far have included ‘bulk amendments’ of partnership tax returns to correct provisional figures.
The current guidance on basis period reform was recently published at BIM81200.