HMRC have released a consultation proposing that all self-employed businesses will be taxed on profits earned in a tax year, rather than on the profits of the accounting year ending in that tax year.

Under the current system, if a partnership’s year end does not tie in with the UK tax year end, when an individual joins that partnership, some profits may be taxed twice.

HMRC’s proposal is to remove the existing basis period rules and change to a ‘tax year basis’, which would mean the profit or loss for the business is the profit or loss arising in the tax year, regardless of the accounting date. This will prevent overlap profits from accruing in the future and will result in offset of any unused overlap profits for those in business when the change is made.

James Currie, Senior Manager at Buzzacott, outlines how the proposal will affect self-employed partners, when the new rules are set to be implemented, and how they will operate. Read the full article here.