Best Way to Change Basis Period Advice Sought.

Maharishi

Hello there. hopefully an easy one for an accounts knowledgeable person to answer ...
Sole trader
Do my own accounts and file online since accountant retired 3 years since
Basis period is June to June
My question is this:  my ex adviser told me before he retired that I would find it easier if I brought my basis period in line with the April to April period.  I have been June to June ever since I started 40 years ago, but now I am nearing pension age (2022), it might be a good time to align my basis period with the norm.  So what to do.  Do I:
a)  File a 9 month year?
b)  File a 21 month year?
c)  Other?
Thanks,
M

Dazed_and_C0nfused

When you filed your 2019:20 return (or 2018:19 return if 2019:20 not yet filed) what was your accounting period ending?

Tax return = ?
Accounting end date = ?

Maharishi

Dazed_and_C0nfused said:

When you filed your 2019:20 return (or 2018:19 return if 2019:20 not yet filed) what was your accounting period ending?

Tax return = ?
Accounting end date = ?

2018 - 2019
June 2018

[Deleted User]

An accounting period cannot be greater than 18 months. If you declared your accounts to 30th June 2019 on your 2019/20 tax return, there is nothing that you can do for 2019/20 unless you want to amend the return. Filing dates do not change. 

So, you prepare accounts for the twelve months to 30th June 2020 and also for the nine months to 31st March 2021. BOTH are entered on the 2020/21 tax return on two separate sole trader sections. The problem is that we now have 21 months profits to be declared in one tax year. From this larger figure one can claim your overlap relief which should have been calculated on your first set of accounts or, in your case, 279/365 the profits assessable in the 1997/98 tax year. ( Transitional profit, from memory) You need this figure. Can you obtain it? 

Basis periods are are not for the amateur.

My advice - it is very unlikely that the overlap profits would reduce markedly the effect of paying tax on 21 months profits. Unless there has been a gradual reduction in the profits of course.

For my sins, I used to lecture on this many years ago. Have a look at this:

https://www.taxationweb.co.uk/forum/working-out-overlap-transitional-relief-for-an-old-business-t31461.html

Jeremy535897

OP should know the overlap relief available whether they change basis period or not, as it will be relevant on cessation. OP, ask your retired accountant as soon as possible if you don't have the information, before the files are destroyed.

Maharishi

purdyoaten2 said:

An accounting period cannot be greater than 18 months. If you declared your accounts to 30th June 2019 on your 2019/20 tax return, there is nothing that you can do for 2019/20 unless you want to amend the return. Filing dates do not change. 

So, you prepare accounts for the twelve months to 30th June 2020 and also for the nine months to 31st March 2021. BOTH are entered on the 2020/21 tax return on two separate sole trader sections. The problem is that we now have 21 months profits to be declared in one tax year. From this larger figure one can claim your overlap relief which should have been calculated on your first set of accounts or, in your case, 279/365 the profits assessable in the 1997/98 tax year. ( Transitional profit, from memory) You need this figure. Can you obtain it? 

Basis periods are are not for the amateur.

My advice - it is very unlikely that the overlap profits would reduce markedly the effect of paying tax on 21 months profits. Unless there has been a gradual reduction in the profits of course.

For my sins, I used to lecture on this many years ago. Have a look at this:

https://www.taxationweb.co.uk/forum/working-out-overlap-transitional-relief-for-an-old-business-t31461.html

Yes, my 2019/2020 return will be up until 17 June 2019

My overlap relief is something that I enter every year and is circa £4700 from memory.  There has indeed been a gradual reduction in profits over the last 5 years and as I haven't earned anything from March 15th 2020, it seems like this would be the best time to eliminate the overlap going forward.  My overlap relief exceeds all monies coming in for June 18 2020 to 31 March 2021 as my business has been closed during the virus and is very unlikely to restart prior to April 1 2021.

Thanks for that, seems fairly straightforward, and I did not know about the 18 months limit. 

Maharishi

Jeremy535897 said:

OP should know the overlap relief available whether they change basis period or not, as it will be relevant on cessation. OP, ask your retired accountant as soon as possible if you don't have the information, before the files are destroyed.

Yes, see my previous reply.  I have to enter it every year so I know what it is.  It has been carried forward since forever.

[Deleted User]

Maharishi said:

Jeremy535897 said:

OP should know the overlap relief available whether they change basis period or not, as it will be relevant on cessation. OP, ask your retired accountant as soon as possible if you don't have the information, before the files are destroyed.

Yes, see my previous reply.  I have to enter it every year so I know what it is.  It has been carried forward since forever.

Yes indeed. However I note that there is only the option to do this on the self -employed (full) pages - which is odd! But it has been a while since I did these!

Maharishi

purdyoaten2 said:

Maharishi said:

Jeremy535897 said:

OP should know the overlap relief available whether they change basis period or not, as it will be relevant on cessation. OP, ask your retired accountant as soon as possible if you don't have the information, before the files are destroyed.

Yes, see my previous reply.  I have to enter it every year so I know what it is.  It has been carried forward since forever.

Yes indeed. However I note that there is only the option to do this on the self -employed (full) pages - which is odd! But it has been a while since I did these!

I haven't filed my return yet for 19/20 but will keep an eye when doing so for the option to file the extra 9 months next year around this time.  I always use my ex-accountants *layout when I prepare for filing  and take a screenshot of every HMRC page which I then refer to when filing the following year.  Just seems to alleviate careless mistakes (for me).

Many thanks for the assistance.  Take care.

* Refers to the fact that he never filed for me but produced paper forms for me to enter online as he was totally against doing returns online being 80 ...

[Deleted User]

So - you are not going to declare 21 months accounts on the 2019/20 form and leaving the option for 2020/21? Sorry, I am confused by your opening sentence as you have only 12 days to file for 2019/20.

Maharishi

[Deleted User] said:

So - you are not going to declare 21 months accounts on the 2019/20 form and leaving the option for 2020/21? Sorry, I am confused by your opening sentence as you have only 12 days to file for 2019/20.

No, you are correct.  I have 19/20 prepared and ready to file and will address the 21 months on next year's return.  I hate doing this chore and the least amount of time that I spend on it, the better.