How would the new rules operate?
Taking an example of 31 December:
2022/23 tax year (the transitional year)
- 12 months profits to 31 December 2022;
- Plus: 1 January to 5 April 2023 (generally pro-rata based on taxable profit to 31 December 2023);
- Less: Overlap profits brought forward.
For businesses with higher profits in 2022/23 due to the change in basis, an election to spread those additional profits over a period of up to five years is proposed.
There will be a balance between the cash flow implications of paying all the tax in one go against the risk of higher tax rates (due to rate changes and/or higher profits) in the future. We can help with projections.
2023/24 tax year (tax year basis)
- 6 April 2023 to 5 April 2024 (again, generally pro-rated from the two accounting years)