The Budget publications and an email from HMRC to Chartered Accountants Ireland confirm that the Government is proceeding with basis period reform for taxing sole traders and business partnerships. 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. The Institute also submitted evidence last month to the House of Lords Finance Bill Sub-Committee inquiry on basis period reform which has now been recognised as written evidence.
The change to the basis period rules, which it was announced last month would be delayed one year to apply from 2024/25 with a transition year in 2023/24, will amend the way profits are assessed for each tax year. This will move from current year basis (the taxable profits of a 12-month set of accounts ending in the tax year) to tax year basis i.e. the taxable profits arising in the tax year itself.
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 when legislation and a consultation response document on basis period reform will also be published.
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