Basis Period Reform - easements for provisional figures, provision of overlap relief figures and HMRC’s communications strategy

The CIOT has received the following update from HMRC regarding easements for provisional figures, provision of overlap relief figures and their communications strategy.

Thank you for having taken part in the Government’s consultation on basis period reform, and for your input and feedback into our more recent exploration of options for administrative or policy easements on the issue of provisional figures. This feedback has been incredibly valuable in understanding your views on the various options and alternatives we have been considering for easements, and has been important in developing our understanding of the impacts of those options.

On provisional figures, after considering the feedback provided by stakeholders, as well as the legislative complexity and delivery implications of the options available, the Government has decided to take forward the option that would allow businesses to amend provisional figures to 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 following tax return.

We will give effect to this easement by changing HMRC’s guidance on provisional figures to relax the condition that currently asks businesses to make amendments to provide final figures ‘without delay’. We will make this change before the start of the transition year in 2023/24.

The Government views this option as providing the best balance between targeted admin burden savings and avoiding adding significant new complexity to the tax system. The engagement on other options has shown 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 admin burdens associated with provisional figures.

On overlap relief, 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 the feedback that we have received about businesses looking to change accounting date in the 2021/22 tax year, for businesses looking to change their accounting date in the 2021/22 tax year 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 looking to change accounting dates or use overlap relief in 2022/23 or 2023/24 should wait until we are able to provide further information on overlap relief support for these businesses and agents; we are planning to provide certainty on this in the coming months.

On communications, 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; we plan to continue and expand this comms campaign to raise more awareness about basis period reform.