Another HMRC plan is to change how profits from a business are taxed. This only affects sole traders and partnerships which do not make their accounts up to either 31/3 or 5/4. Full details will be circulated to our clients which this affects in due course. However, in a nutshell, profits of a 12-month period and another period of up to 11 months will all become liable to tax in one year, with a deduction for overlap profits which arose when the business commenced.
Whilst this comes in from 2023/24, it is worthwhile reviewing this year (2021/22) as it may be a good time to accelerate this change by drawing up accounts to 31/03/2022. There is no straightforward answer and “crunching the numbers” is the only way to determine this.
Whilst there will be no obligation to change the business accounting date, for those businesses that are dilatory in preparing accounts or those that have accounting dates between December and March (other than 31 March) will almost certainly find that estimates are needed, and corrected returns filed – extra work that could be avoided.
If you need any assistance, please contact us for more information.
