The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The initial draft clauses for the Finance Act 2022 were published on 20 July 2021 and include more detail on previously announced proposals. Whilst the Government refers to it as draft legislation for Finance Bill 2021/22, in this commentary, for clarity, it is referred to as Draft Finance Bill 2022. The final contents of the Bill will be subject to confirmation at a later date, expected to be in the Autumn, though it is uncertain whether this will be combined with an Autumn Budget.
The Government is introducing a reform of basis periods for unincorporated trading businesses in draft FB 2022 whereby businesses will be taxed on the profits arising in a tax year for 2023/24 with a transitional year in 2022/23. This is different to the current year basis in force at the moment which uses the general rule that a basis period for a tax year is the 12 months ending with the accounting date in that tax year together with additional rules for the opening and closing years of a business and when there is a change in the accounting period end. The operation of the current rules in the early years of a business can create overlapping basis periods which result in profits being charged twice and the creation of overlap relief which is usually given on the cessation of the business. The proposed reform aims to make the basis of assessment for trading profits simpler and aligned with other sources of income but also links in with the Government’s plans for Making Tax Digital which becomes mandatory for self-employed businesses from April 2023.
The changes include the following:
from 2023/24, the profits of the tax year will be the profits arising in that tax year with accounting period profits being apportioned by the number of days or another reasonable basis
the basis period for the transitional year of 2022/23 will be
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