Earlier this month, HMRC wrote to the House of Lords Economic Affairs Finance Bill Sub-Committee, setting out the Government’s decision on which of the options for easements for provisional figures is being taken forward in the context of basis period reform, and also provided an update on overlap relief and communications on this change. The key points from this letter were set out in an email to Chartered Accountants Ireland and are reproduced below.
Provisional figures
After considering the feedback provided by stakeholders and the legislative complexity and delivery implications of the options available, the Government has decided to allow businesses to amend provisional figures in the normal time limits for amendments. This will effectively allow businesses and agents to amend provisional figures at the same time as the business’s next tax return.
HMRC will give effect to this easement by changing its guidance on provisional figures to relax the condition that currently asks businesses to make amendments to provide final figures ‘without delay’. This change will be made before the start of the transition tax year 2023/24.
The Government views this option as providing the best balance between targeted administrative burden savings and avoiding adding significant new complexity to the tax system.
Engagement on other options showed that they would require significant new legislation, complex eligibility rules, or would have wider effects on Income Tax Self-Assessment that would outweigh the benefits of removing the administrative burden associated with provisional figures.
Overlap relief
The provision by HMRC of figures for overlap relief was a recommendation of this Institute in its response to the consultation on basis period reform in summer 2021. According to the letter to the House of Lords Economic Affairs Finance Bill Sub-Committee, the Government is continuing to explore methods of providing overlap relief figures to taxpayers and their agents; whether by informing businesses and agents of overlap relief figures that HMRC holds, or providing a method for businesses and agents to request these figures from HMRC.
In recognition of feedback that some businesses are seeking to change accounting date in 2021/22, for such businesses HMRC will now be able to provide details of overlap relief figures or historic profit figures on request, if these figures are recorded in HMRC systems. Taxpayers should ring the HMRC Self-Assessment Helpline and agents should ring the Agent Dedicated Line if they need this information to complete a 2021/22 tax return.
Businesses which are changing accounting date or using overlap relief in 2022/23 or 2023/24 should wait until HMRC is able to provide further information on overlap relief support for these businesses and agents; HMRC is planning to provide certainty on this in the coming months.
Communications on basis period reform
Alongside specific comms on overlap relief and provisional figures, the Government is continuing to explore additional general communications for basis period reform. For unrepresented taxpayers, HMRC is also looking at providing specific and detailed support to help these individuals complete their tax returns for the transition tax year. HMRC has started more general communications about basis period reform, such as through news articles on GOV.UK and in the Agent Update and Employer Bulletin and plans to continue and expand this comms campaign to raise more awareness about basis period reform.